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The Federal Reserve Can Not Account for $9 Trillion in Off-Balance Sheet Transactions? 42 comments

by: Tyler Durden May 11, 2009    
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This video is a must watch for anyone who wants to understand just how "effective" the Fed is at safeguarding taxpayer money. Apparently nobody at the Federal Reserve has any clue where the trillions of dollars that have come from the Fed's expanded balance sheet have gone. Additionally, nobody there seems to have any idea what the losses on the Fed's $2 trillion portfolio really are.

As for the pittance of $9 trillion in Fed off-balance sheet transactions over the past 8 months, well, yeah, that's also somewhere out there... Just don't ask the Federal Reserve where.

Rep. Alan Grayson summarizes it best: "I am shocked to find out that nobody at the Federal Reserve is keeping track of anything."

(P.S. Zero Hedge uses the term "anyone" generically, with the presumption that the Fed's Inspector General should traditionally receive most memos on memorandum items that deal with a dollar sign and +/- 12 zeros after it).



hat tip g llc

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This article has 42 comments:

  •  
    TD, PLEASE do some work on the COF share offering today and how it was manipulated by Barclay's!!! Take a look at the chart today and tell me who was buying in such large chunks whenever the stock hit $27.75.
    May 11 05:43 PM | Link | Reply
  •  
    What a waste of taxpayer money that pays these peoples salaries at the Inspector General Office of the Federal Reserve. Proof that Sheeple really do exist and caught live on video tape.
    May 11 05:53 PM | Link | Reply
  •  
    Have they checked under the cushions?
    May 11 06:15 PM | Link | Reply
  •  
    An unfair characterization of the situation. This was questioning of one office,the Inspector General of the Federal Reserve; it does not imply that "nobody at the Federal Reserve has any clue" where the money went. The money created by the Federal Reserve cannot really be characterized as "taxpayer money." That doesn't mean that we shouldn't be careful about its use - but it is not fairly characterized as money that has been collected from taxpayers. The federal government has been given some very complex tasks and must perform them under complex procedures(often mandated by Congress). It is very easy to mischaracterize what the government is doing but it does not lead to a fruitful discussion of what the hell we should be doing to get out of this mess.
    May 11 06:21 PM | Link | Reply
  •  
    This is an absolutely pathetic performance by Ms. Coleman. The institutional indifference to how vast sums of money are deployed is beyond comprehension.

    Obama has the authority to dismiss the Inspector General for cause, and appoint an activist. But chances of his doing so appear slim, if only because this story has been practically invisible. A search on Google News showed only four sites that had covered the story: CNBC, Nolanchart.com (which I gather is Libertarian-oriented), Salon.com (progressive/left politics), and Goldseek.com -- IOW, nothing even close to mainstream news media, except for the one mention on CNBC.

    Maybe some of the missing trillions went to secretly bail out news media companies, in exchange for their silence.
    May 11 06:30 PM | Link | Reply
  •  
    Video not surprising. That gal was like a butterfly on a pin. The real shocker would have been if they could have explained where the money is. Our wonderful government doing its job as usual.
    May 11 06:34 PM | Link | Reply
  •  
    This is a bit worrisome. A few trillion here, a few trillion there . . . that sort of thing can add up after awhile. : )
    May 11 06:49 PM | Link | Reply
  •  
    But of course there is no conspiracy. Everyday more and more information comes out all pointing to the same conclusion.
    May 11 07:17 PM | Link | Reply
  •  
    nobody made her or the fed look like fools except themselves. Both fed and treasury have been asleep the enitre crisis. it wasn't going to spread, etc. What ends up happening. they failed to safeguard the american people from corporate mistakes. they got it wrong all along, and we pay while the banker, fed, and treasury laugh at us for being fools. you think the lady in this video isn't going to land a nice cushy coporate job when this is done for loosing track of a trillion. Guess again. My guess the first place to look is goldman. perhaps they are using it to manipulate the market. with the fed, treasury, nyse, and sec consent.


    On May 11 06:21 PM user396040 wrote:

    > An unfair characterization of the situation. This was questioning
    > of one office,the Inspector General of the Federal Reserve; it does
    > not imply that "nobody at the Federal Reserve has any clue" where
    > the money went. The money created by the Federal Reserve cannot
    > really be characterized as "taxpayer money." That doesn't mean that
    > we shouldn't be careful about its use - but it is not fairly characterized
    > as money that has been collected from taxpayers. The federal government
    > has been given some very complex tasks and must perform them under
    > complex procedures(often mandated by Congress). It is very easy
    > to mischaracterize what the government is doing but it does not lead
    > to a fruitful discussion of what the hell we should be doing to get
    > out of this mess.
    May 11 07:22 PM | Link | Reply
  •  
    no leverage!!!
    May 11 07:30 PM | Link | Reply
  •  
    There is an emerging market called Citizens Powered Media. The Huffington Post was the first to release it. The Burning Platform who's forum technology we provide released it as well. That site went from 0 visitors to 50,000 a month in less then 3 months with almost no marketing. I guess the truth still sells.


    On May 11 06:30 PM Alan Young wrote:

    > This is an absolutely pathetic performance by Ms. Coleman. The institutional
    > indifference to how vast sums of money are deployed is beyond comprehension.
    >
    >
    > Obama has the authority to dismiss the Inspector General for cause,
    > and appoint an activist. But chances of his doing so appear slim,
    > if only because this story has been practically invisible. A search
    > on Google News showed only four sites that had covered the story:
    > CNBC, Nolanchart.com (which I gather is Libertarian-oriented), Salon.com
    > (progressive/left politics), and Goldseek.com -- IOW, nothing even
    > close to mainstream news media, except for the one mention on CNBC.
    >
    >
    > Maybe some of the missing trillions went to secretly bail out news
    > media companies, in exchange for their silence.
    May 11 07:39 PM | Link | Reply
  •  
    watch the last video and you will start to see one of the ways wall street designed this crisis, profited on all the way down, and then let the tax payer get stuck.
    May 11 07:44 PM | Link | Reply
  •  
    Wow....I'm not sure that woman can manage her grocery list...

    We are so screwed....
    May 11 07:49 PM | Link | Reply
  •  
    User wrote:
    "The money created by the Federal Reserve cannot really be characterized as "taxpayer money."
    True, it didn't come from taxes. It was created out of thin air. Our fiat currency will fail like every other one in the history of the world. The question is when and after how much inflation?
    May 11 07:50 PM | Link | Reply
  •  
    I wouldn't put much faith in the nature of any questions asked of anybody by a politician. They are always loaded in one way or another for political gains.
    May 11 08:09 PM | Link | Reply
  •  
    The incompetence of these guys managing the Federal Reserve as represented by this woman and their unwillingness to be held accountable is a threat to the national wellbeing.
    May 11 09:03 PM | Link | Reply
  •  
    We may be missing the point: They know but they are not saying since we would not approve of the applications.

    There is many a scandal yet to be surfaced, all that is different this time is the size of the defalcations.

    We will pay and pay and pay, but never reach the end.
    May 11 09:21 PM | Link | Reply
  •  
    Tyler, Durden, Tyler Durden, Whoever or whatever you are-

    had a little bit of time to run over this and was wondering how this applied to anything in your works. don't know validity but when the big man takes some time to pick up some of the golden goodness...we could have some problems.


    www.gata.org/node/7413

    not sure if this will even get you or if someone knows how to contact you. fruitless effort
    May 11 09:48 PM | Link | Reply
  •  
    what's the end game? Is it hate on the dollar? Create one world currency? And if so, who gains the most? What if everyone yanked out their 401k and bought China stocks? Or bought the Yen and shorted Sony?

    Why can't Tyler tell us all what to do so we can make a splash? Start a Fight Club Fund and we'll all invest now
    May 11 09:51 PM | Link | Reply
  •  
    Hang in there, Mono. Keep posting and cross-posting. It's a team effort trying to keep track of all the three ring circus stunts and flying toilet paper.
    May 11 10:05 PM | Link | Reply
  •  
    When you're dumping boatloads of money out of a helicopter, it's hard to keep track of every dollar.
    May 11 10:10 PM | Link | Reply
  •  
    To user396040,

    When someone controls the supply of money, they can potentially/essentially control the value of the money in your pocket. So, I would definitely say that any money printed by the FED is taxpayer money!
    May 11 10:17 PM | Link | Reply
  •  
    User396040 is correct, the Federal Reserve's money is not the public's, it belongs to the owners of the Federal Reserve as a private bank. However, the other commenter's are correct we can treat it like the taxpayers because the ultimate person who must cover for their losses is the US Treasury. Thus, there is a strong argument to ask why it is privately owned? If it is so, it should be responsible for it's own behavior and losses. If it is not, then it should act in the best interest of the people and behave responsibly.

    And then, there is the little issue of it's rights to manipulate interest rates and blow up it's balance sheet without any checks and balances thereby eroding the value of money to nothing. I do say, the Federal Reserve is probably the worst run government institution if in fact was a government institution. I suppose it has something to do with it not being democratic or directly accountable to any elected official making it's legitimacy dubious at best. Apparently, it is not even properly monitored.

    I support a Central Bank. Just one that acts in the best interest of citizens, not banks.
    May 11 10:37 PM | Link | Reply
  •  
    The buck stops at the top!

    It is time to impeach the foolish man. He doesn't mean to be corrupted he is just out matched by the real powers.
    May 11 10:59 PM | Link | Reply
  •  
    You are right.. there is no conspiracy... they are not hiding it, but they are not telling us either. They are lies by omission.


    On May 11 10:26 PM Cetin Hakimoglu wrote:

    > There is no conspiracy. I don't fear my government and I have trust
    > in the federal reserve. The stock market does too, which is why it
    > keeps going up. Lets stop pointing fingers.
    May 11 11:54 PM | Link | Reply
  •  
    A government large enough to give you everything you want is large enough to take everything you have.


    On May 11 10:26 PM Cetin Hakimoglu wrote:

    > There is no conspiracy. I don't fear my government and I have trust
    > in the federal reserve. The stock market does too, which is why it
    > keeps going up. Lets stop pointing fingers.
    May 12 12:33 AM | Link | Reply
  •  
    Absolutely no official (public or private) should:

    1) Say the word "um" more than once per day
    2) Answer a question with "we're in the process of doing ____"
    3) Appear so absolutely clueless when responding to a simple question
    4) Evade a question for 30 seconds then ask for the question to be repeated (all the while searching for an answer (s)he never finds)
    5) Have no clue what has happened to millions of dollars
    6) Have no clue what has happened to billions of dollars
    7) Have no clue what has happened to trillions of dollars
    8) Be completely and totally raked over the coals with so little effort

    But hey. Seems like she is trying. I'm sure she'd be secure in a private sector job where incompetence does not merit penalty.
    May 12 12:41 AM | Link | Reply
  •  
    This is indeed a disturbing snippet of the sorts of people representing the most important financial groups in our government, the FRB, who have come before congressional committees/hearings unprepared to answer to primal issues: Where did all that money ($9T) go?

    and User 396040..
    You respond as if this were a hearing and you are in the box; who are you? Do you work at FRB? Do you work for the USGov? Are you simply a useless prop, surrogate, whatever, fanboy of Obama?

    "...money created by the Federal Reserve cannot really be characterized as "taxpayer money."

    "...federal government has been given some very complex tasks and must perform them under complex procedures.."

    What kinds of ridiculous statements are these? The funds handled by ANY branch of the Government ARE INDEED, taxpayers dollars! What other kind of funny money do you sir, think that these $9T are, for crying out LOUD?!

    And, if these are very complex tasks and procedures, then why may I ask, are we not entitled to have COMPETANT WELL-INFORMED serious people assigned to be managing, overseeing, tracking and investigating their movements thru this complex system?? I mean, is $9T so inconsequential that it isn't important to expect this kind of attention???

    sheesh!
    May 12 01:13 AM | Link | Reply
  •  
    "Apparently nobody at the Federal Reserve has any clue where the trillions of dollars that have come from the Fed's expanded balance sheet have gone. "

    The conclusion reached by this article is erroneous. Apparently, nobody at the Federal Reserve IG has any clue. I'm pretty certain that key members of the Fed know exactly what they are doing, and it seems apparent that they are keeping it a big secret.
    May 12 02:36 AM | Link | Reply
  •  
    Bloomberg (Merrill Lynch), CNBC (GE Capital), Fox (Al-Waleed bin Talal) and CNN (Time Warner) agree there are no problems, want Cetin to buy more stock.
    May 12 07:53 AM | Link | Reply
  •  
    oh, really? who is essentially backing the debt of the govt and the fed? the taxpayer, of course. Govts (and by extension the fed) can borrow money only because of their taxing power. Whenm the fed lends liberally against toxic collateral (and i include here large chunks of 'safe' fannie/freddie debt) you can expect a couple hundred billion in losses to show up. and who finally pays for it all? the taxpayer, and what is the biggest shame, it's our children and grandchildren who will inherit a mountain of debt (besides depleted natural resources) and have to pay all of it back while having no say at all today when all these trillions are squandered away.
    the govt (and the fed) never spends any money because it doesn't have any. all it does is to distribute taxpayer money (of current and future generations)

    > The money created by the Federal Reserve cannot really
    > be characterized as "taxpayer money." That doesn't mean that we shouldn't
    > be careful about its use - but it is not fairly characterized as
    > money that has been collected from taxpayers.
    May 12 08:17 AM | Link | Reply
  •  
    Here's my guess:
    The money most likely went to cover the AIG unwinds, which means it went straight to the big banks with toxic assets, both US and foreign. This was likely done to prop up the recent earnings season. This would have the effect of driving stock prices up so that the banks and REIT's could raise more money by offering new shares. It's the only clear way to ease the pain.
    May 12 08:35 AM | Link | Reply
  •  
    Cetin: all of television is propaganda aimed at people who are too lazy to read
    May 12 08:46 AM | Link | Reply
  •  
    the u.s. govt. prints the money. it is then sold to the fed at cost. it is then loaned back to the us. govt at face value with interest. it is owned by stockholders. good luck finding out exactly who. you will track it to some banking institutions. they have never submitted to an audit. i would hazard a guess that the "missing" funds are in real assets. it is not listed under govt.. it is unconstitutional using a scam to fleece the u.s. by controling our curency. they are not bumbling idiots. i wish they were. the men behind the formation had no regard for the u.s. citizens. look at the rober barrons involved. wilson regretted what he allowed.
    it was to prevent depressions, control recessions. at least that was the stated purpose. instead it has bled the wealth from this country.
    they will stumble and appear inept and "laugh all the way to the bank.
    history buff seems to believe jefferson's statement is a myth. jackson understood the banksters. no politician will lean on them to hard. jfk tried that and was killed in front of the nation then it was swept under the rug. the warren commission all recieved their rewards. anyone who knows firearms knows better.
    read "death in the emergency room", published in the next issue of post magazine, in which the doctor compares the pistol wound in the throat to the rifle shot in the head.
    there is o conspiracy. they are all honorable men.
    May 12 08:59 AM | Link | Reply
  •  
    You need to read some history books. In 1913 both the Income Tax and Federal Reserve Bank were born. Government decided that they needed to spend money but where to get it from? Income tax was a politically unpopular way but taxing the rich made it at least more favorable to all. The income tax of course was not enough to cover the expenses of the government so they turned to the FED for the rest. Since very few really understood how that process worked, they were able to print money at will before the public discovered how it would affect them down the road. We all know now that this was a one-way ticket to inflation, which is the most cruel type of tax. Most cruel because it benefits those who receive it first and least of all, those that have to pay the higher prices. To ignore the FED's ability to tax is really discourteous to the American people.


    On May 11 06:21 PM user396040 wrote:

    > An unfair characterization of the situation. This was questioning
    > of one office,the Inspector General of the Federal Reserve; it does
    > not imply that "nobody at the Federal Reserve has any clue" where
    > the money went. The money created by the Federal Reserve cannot really
    > be characterized as "taxpayer money." That doesn't mean that we shouldn't
    > be careful about its use - but it is not fairly characterized as
    > money that has been collected from taxpayers. The federal government
    > has been given some very complex tasks and must perform them under
    > complex procedures(often mandated by Congress). It is very easy to
    > mischaracterize what the government is doing but it does not lead
    > to a fruitful discussion of what the hell we should be doing to get
    > out of this mess.
    May 12 09:21 AM | Link | Reply
  •  
    Does seem inflammatory; I thought most of these facilities were associated with auctions or transactions (purchase/sale) of securities created under these facilities to create liquidity, which would be trackable, maybe even cleared transaction events. Weren't there stories recently about TALF auctions that were anemic, few takers? So when she said they were involved in investigation at a higher level, she wasn't ready with answers or documentation about transactions at the level he is asking for. She seemed unprepared for the particular type of question, & was dodging with vague answers, which superficially made her look bad, but he could have probed a different way, instead of like a DA cross examining, which has its place, to ask her instead to elaborate on what she did know, & then specify a menu of things he wanted her to come back with. So I agree that this doesn't necessarily mean no one knows where the funds have gone.


    On May 11 06:21 PM user396040 wrote:

    > An unfair characterization of the situation. This was questioning
    > of one office,the Inspector General of the Federal Reserve; it does
    > not imply that "nobody at the Federal Reserve has any clue" where
    > the money went. The money created by the Federal Reserve cannot
    > really be characterized as "taxpayer money." That doesn't mean that
    > we shouldn't be careful about its use - but it is not fairly characterized
    > as money that has been collected from taxpayers. The federal government
    > has been given some very complex tasks and must perform them under
    > complex procedures(often mandated by Congress). It is very easy
    > to mischaracterize what the government is doing but it does not lead
    > to a fruitful discussion of what the hell we should be doing to get
    > out of this mess.
    May 12 09:51 AM | Link | Reply
  •  
    Well, I see I got an interesting discussion started. Point one - the fact that the IG of the Fed doesn't have an answer to the question does not lead to the conclusion that "nobody at the Fed has any clue." In fact, the Fed puts out periodic reports which provide information as to the make up of its balance sheet. A lot of the things on the balance are treasury securities, funds provided to AIG to cover CDS's, bonds of Fannie and Freddie, short term loans to banks, etc. Point two. The Fed actually creates new money and does not collect money from taxpayers. This function must be exercised with care but the Fed cannot be described as spending taxpayer money. Of course, the creation of more money tends to be inflationary and therefore can reduce the value of money held by the public, as well as increasing the nominal value of assets held by the public. I am not suggesting that the Fed should be careless in this function but I do think that at this time inflation is not high on the list of economic problems we are facing. Down the road, it is definitely a concern and this has led me to stay away from long term treasuries. But, right now, an expansive monetary policy is the only real alternative to a depression which would leave our children( I have two) and our grandchildren in much worse shape. Point three. I am not a government employee but does that really matter? Isn't the important thing really to get accurate information and get to the right answer on questions that are difficult enough to resolve on the merits without the distraction of detours into ad hominem attacks and inaccurate information?
    May 12 12:12 PM | Link | Reply
  •  
    Write your congressman asking him/her to support Congressman Ron Paul's bill HR-1207 "Federal Reserve Transparency Act" (currently 149 co-sponsors). America needs the Federal Reserve to be held accountable to the people!
    May 12 01:46 PM | Link | Reply
  •  
    The joke is on the American public. 9 trillion dollars or 12 trillion dollars or whatever.

    To actually have a working health care system that doesn't leave people dying prematurely of treatable illness: about 1 /20th of what the taxpayer has shelled out in 12 months to the bondholders of the banks and investment banks (both in Europe and the U.S.)
    May 12 10:17 PM | Link | Reply
  •  
    "There is no conspiracy. I don't fear my government and I have trust in the federal reserve. The stock market does too, which is why it keeps going up. Lets stop pointing fingers. "

    Cetin I still can't decide if you are a sheep or a lemming....
    May 13 11:46 AM | Link | Reply
  •  
    Pardon my stupidity, but what is an off balance sheet transaction for the Treasury? I understand what that means for a company (e.g. a lease arrangement).

    As to the actual conversation, it doesn't appear that the congressman has any cluse what these transactions mean nor does the IG have authority to investigate on such matters.

    I agree with the overall tone: Congress (or the public in general) should be able to ask some figurehead at the Treasury exactly what are the transactions involved.

    Again, in a public company the footnotes to the quarterly/annual reports would detail what the transactions were and their materiality.
    May 14 10:47 AM | Link | Reply
  •  
    What??? Creating money is not a tax? What happens when inflation kicks in??? That is an implicit tax!!! Governments love to inflate away problems, but that happens when the country is dieing.


    On May 11 06:21 PM user396040 wrote:

    > An unfair characterization of the situation. This was questioning
    > of one office,the Inspector General of the Federal Reserve; it does
    > not imply that "nobody at the Federal Reserve has any clue" where
    > the money went. The money created by the Federal Reserve cannot
    > really be characterized as "taxpayer money." That doesn't mean that
    > we shouldn't be careful about its use - but it is not fairly characterized
    > as money that has been collected from taxpayers. The federal government
    > has been given some very complex tasks and must perform them under
    > complex procedures(often mandated by Congress). It is very easy
    > to mischaracterize what the government is doing but it does not lead
    > to a fruitful discussion of what the hell we should be doing to get
    > out of this mess.
    Oct 02 04:45 PM | Link | Reply
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