Tuesday, January 12, 2010

Bernanke Hell-Bent on Slaying the Transparency Dragon

Today lawyers for the Fed asked a U.S. appeals court to block a previously issued ruling by a lower court, that would have required the Fed to disclose the identity of financial institutions that received a $2 trillion bailout from the Fed. In 2008, in the wake of Lehman's collapse, the Fed expanded its emergency lending powers to unprecedented levels and becoming the lender of last resort to several financial institutions. Now Bernanke is trying his level best to prevent us the taxpayer, whose money he conveniently lent out, from learning the identities of the secret borrowers. According to an article in Business Week:
The Fed’s balance sheet debt doubled after lending standards were relaxed following Lehman’s failure on Sept. 15, 2008. That year, the Fed began extending credit directly to companies that weren’t banks for the first time since the 1930s. Total central bank lending exceeded $2 trillion for the first time on Nov. 6, 2008, reaching $2.14 trillion on Sept. 23, 2009.
So in this unprecedented event where the Fed lent out trillions of dollars of OUR hard earned money, does the Fed not have an obligation to the taxpayers to tell us which institutions got the money and most importantly, what kind of collateral did the Fed accept against these loans? In November 2008 Bloomberg filed a lawsuit to get precisely these details under the Freedom of Information Act.
Bloomberg has been trying for almost two years to break down a brick wall of secrecy in order to vindicate the public’s right to learn basic information,” Thomas Golden, an attorney for the company with Willkie Farr & Gallagher LLP, wrote in court filings. He said the Fed may be trying “to draw out the proceedings long enough so that the information Bloomberg seeks is no longer of interest.”
And guess what, in a ruling that came out last year, the lower court agreed with Bloomberg that the taxpayers have a right to know.
In her Aug. 24 ruling, U.S. District Judge Loretta Preska in New York said loan records are covered by FOIA and rejected the Fed’s claim that their disclosure might harm banks and shareholders. An exception to the statute that protects trade secrets and privileged or confidential financial data didn’t apply because there’s no proof banks would suffer, she said.
The central bank “speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed,” Preska, the chief judge of the Manhattan federal court, said in her 47-page ruling. “Conjecture, without evidence of imminent harm, simply fails to meet the board’s burden” of proof.
It is this ruling that the Fed is now appealing.
The Fed appealed the ruling arguing that disclosure of “highly sensitive” documents, including 231 pages of daily lending reports, threatens to stigmatize lenders and cause them “severe and irreparable competitive injury.” “Confidentiality is essential to the success of the board’s statutory mission to maintain the health of the nation’s financial system and conduct monetary policy,” Assistant U.S. Attorney General Tony West and Fed lawyer Richard Ashton wrote in a legal brief to the appeals court. “The board’s ability to administer lending programs crucial to maintaining national financial and economic stability will be severely undermined” if lenders won’t come to the regional Federal Reserve Banks “for their funding needs, particularly in time of economic crisis,” they said.
What the Fed is trying to say here is that confidentiality is essential to conducting this large scale robbery of the American taxpayer by the banking elite. And helping the Fed slay the transparency dragon, are the very robbers the Fed is trying to protect - the banking institutions.
The Fed is joined in its bid to overturn Preska’s order by the Clearing House Association LLC, an industry-owned group in New York that processes payments between banks.The group includes ABN Amro Bank, a unit of Royal Bank of Scotland, Bank of America, The Bank of New York Mellon, Citigroup, Deutsche Bank, HSBC Holdings, JPMorgan Chase, US Bancorp and Wells Fargo.
Aww...what are good friends for?  

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