Like most people I don't have enough time to keep up with everything that goes on in Washington. But now and then something comes along like the just released Federal Reserve documents and I'll devote a day trying to get to the facts.
I'm not proud to say that I have become one of those people I used to call headline readers and news-biters. It means that's how we form our general opinion about what's happening in the World. I'm not asleep, just information overloaded. But I'm still lucid enough to know I need filters to cut through the noised.
So I've acquired a blanket mistrust of politicians at all levels. I listen to what they say, but I am reading between the lines and trying to figure out what they are really saying.
Likewise, I barely trust the media. Do you know what I mean when I say you usually don't need a caption under a politician being interviewed to know their party, you can just close your eyes and listen? Most media have become that way.
So I filter all news and political speeches and come up with what seems legit to me. Oddly enough, I am usually accurate, but I think it's because all you have to do is presume the truth is not forthcoming. That's really disappointing.
The following is what I gleaned from reports on the current Fed issue, which we'll probably hear a lot about until the next big crisis, which should be a day or two. That's another thing I wonder about, all these crises, how many are by design to get our minds off something else?
Okay, here we go. These are what I believe are true facts. You be your own judge.
In 2008, Bloomberg LP, parent of Bloomberg News, requested details about banks that borrowed money from the Fed during the 2007 to 2008 financial crisis.
The Fed denied Bloomberg's request, and Bloomberg LP sued under the Freedom of Information Act.
Bloomberg reports that the Fed argued against any disclosure saying the stigma attached to borrowing from the Fed might cause runs on banks, drops in bank stock prices, and even bank closings. A trial judge ruled in 2009 that the Fed had to surrender the information.
The Fed declined taking the case to the Supreme Court, but the Clearing House Association, a group of major commercial banks stepped in and asked the high court to intervene.
On March 21, 2011, the Supreme Court refused to hear the case thus leaving intact the order that the Fed must release the information originally requested by Bloomberg. At this point arguing further was a moot point because the Fed was eventually going to have to give up the information anyway because of HR 4173, aka ‘Dodd-Frank Wall Street Reform and Consumer Protection Act.’’
HR 4173 sounded like a win for the American people in that it broke the Fed's wall of secrecy. That is until I saw a Los Angeles Times article refer to it as “The second major expansion of Washington's regulatory power during the Obama administration — the first being the comprehensive health care reform law enacted in March.”
In any case the Fed documents have been released and people are beginning to analyze what they mean. There will be much slanting rooted in whether or not the opinion-giver likes President Barack Obama, but that's to be expected and you have to sort through it.
So far I am not shocked by the what the Fed did, but that's because I had already added the Fed and banks to the compartment in my brain reserved for groups that can't be trusted. That said, here is more of what I had either forgotten or didn't know until doing my crash research project.
In December 2010, Congress required the Fed to reveal details of assistance it provided through emergency programs, but discount window loans were exempted. The central bank has always resisted transparency for discount window loans. According to William Poole, former president of the St. Louis Fed. “Other loans are another matter but banks that borrow at the discount window are often presumed to be in financial trouble. That might create a run on those banks and will make banks in the future reluctant to borrow.”
Senator Bernard Sanders, a Vermont Independent who wrote Fed transparency provisions in HR 4173, said that Fed Chairman Ben S. Bernanke “now must finally understand that this money doesn’t belong to the Federal Reserve, it belongs to the American people and the American people have a right to know how their taxpayer dollars are being put at risk.”
All Gov online reported the biggest recipients of the 2008 payouts were foreign—not American—institutions.
$26 Billion went to the Arab Banking Corporation whose majority owner is the Central Bank of Libya. Because the Libyan-owned bank is headquartered in Bahrain, it is exempt from economic sanctions against the regime of Libyan dictator Col. Muammar el-Qaddafi. Federal Reserve Chairman Ben Bernanke justified aid to the Libyan-owned bank on the basis that it has a branch on Third Avenue in New York City.
The single largest borrower was Dexia, a French-Belgian bank that frequently held more than $30 billion in outstanding loans.
Depfa Bank Plc of Germany received $24.5 billion.
Referring to discount window borrowers, Dino Kos, managing director at Hamiltonian Associates Ltd., a New York-based economic research firm and a former head of open market operations at the New York Fed said. “Does transparency at such a granular level really add to anybody’s wealth of knowledge?” I'm sorry, I can't resist: What does that even mean?
After Bloomberg filed suit, Fox News requested similar records over a longer period of time and also filed suit. Fox stands to receive 6,186 pages of documents on loans made from August 2007 to November 2008.
And in closing, in case you forgot as I had, for the past 30 years Congressman Ron Paul has worked to bring much-needed transparency and accountability to the Fed. In 2009 and 2010 his bill to audit the Fed passed as an amendment both in the House Financial Services Committee and in the House itself. But eventually the most significant portions of the bill were derailed. Paul's website covers this in detail.
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