In case you somehow managed to miss it, our friendly
pawnbroker of last resort central bank has been taking lots of crap collateral in return for loans under its alphabet soup of facilities. As we are learaning in our housing meltdown, collateral may not prove to be worth as much as it was said to be at the time the loan was made. Inquiring minds are curious as to what, exactly the Fed has taken, particularly as the numbers are becoming stratospheric.
Bloomberg has asked nicely for some of this information, and is now being forced to sue under to the Freedom of Information Act, and the Fed intends to fight! This ought to be a scandal, but after the TARP, the electorate is seems resigned to taxpayer money being thrown at floundering financial enterprises with little in the way of checks or prudence. If the Fed indeed was taking conservatively valued collateral as it has always claimed it was, there would be no reason for it to attempt to squash this request. The Fed’s argument, as I infer, is the loans were made by the Federal Reserve Bank of New York, which isn’t a federal agency and thus not subject to the FOIA.
From Bloomberg. Note I was sent the text by reader Marshall; the story is in typical Bloomberg style, including its odd quotation marks, but I cannot find it one the free version of the site, which means it is either only on the professional version as of now (odd) or they yanked the story (troubling, particularly since the case is a mater of public record):
Update 5:25 PM A reader did find it on the Bloomberg site, and the link has been added above, but note that as of when the article was posted, it did not come up under a Bloomberg site search (using first “Winkler” and then “Thro”). It may have been posted on the professional site first with a delay before it went up on the hoi polloi version.
Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.
The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn’t seek money damages.
“The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.
The Fed has lent $1.5 trillion to banks,…. Collateral is an asset pledged to a lender in the event that a loan payment isn’t made.
The Fed made the loans under 11 programs in response to the biggest financial crisis since the Great Depression…
Bloomberg News on May 21 asked the Fed to provide data on the collateral posted between April 4 and May 20. The central bank said on June 19 that it needed until July 3 to search out the documents and determine whether it would make them public.
Bloomberg never received a formal response that would enable it to file an appeal. On Oct. 25, Bloomberg filed another request and has yet to receive a reply.
The Fed staff planned to recommend that Bloomberg’s request be denied under an exemption protecting “confidential commercial information,” according to Alison Thro, the Fed’s FOIA Service Center senior counsel. The Fed in Washington has about 30 pages pertaining to the request, Thro said today before the filing of the suit. The bulk of the documents Bloomberg sought are at the Federal Reserve Bank of New York, which she said isn’t subject to the freedom of information law.
“This type of information is considered highly sensitive, and it would remain so for some time in the future,” Thro said.
The Fed didn’t give Bloomberg a formal response because “it got caught in the vortex of the things going on here,” said Michael O’Rourke, another member of the Fed’s FOIA staff…
The case is Bloomberg LP v. Federal Reserve, U.S. District Court, Southern District of New York (Manhattan).
Update 11/8, 3:30 AM David Merkel supports the idea of disclosure of the Fed collateral, and points out that insurers have very detailed disclosure, and no harm come to them.