Bloomberg’s well-publicised attempt to get the names of those institutions benefiting from the more than $2,000bn of emergency loans from US taxpayers - together with details of the assets the Fed is accepting as collateral - has failed to come up with anything. The news agency filed a request under the US Freedom of Information Act, which was declined.
In fact, the Fed responded by saying that it considers itself to be allowed to withhold internal memos as well as information about trade secrets and commercial information.
According to Bloomberg:
The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests. “If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, who oversees about $14 billion at New York-based ICP Capital LLC.Bloomberg says it was worried the Fed lending programme was not subject to the same oversight safeguards that Congress imposed on the TARP. As the agency rightly points out, Fed lending exceeded $2,000bn for the first time on November 6, spiking specifically when central bank governors relaxed collateral standards to accept securities that weren’t rated AAA.
The Fed did provide Bloomberg with three e-mails, however. Somewhat mysteriously they disclosed the senders and recipients but completely erased the contents bar two phrases which identified a vendor as “IDC.” As Bloomberg explains:
One of the e-mails’ subject lines refers to “Interactive Data — Auction Rate Security Advisory May 1, 2008.” ‘Multiple Harms’ Brian Willinsky, a spokesman for Bedford, Massachusetts- based Interactive Data Corp., a seller of fixed-income securities information, declined to comment. “Notwithstanding calls for enhanced transparency, the Board must protect against the substantial, multiple harms that might result from disclosure,” Jennifer J. Johnson, the secretary for the Fed’s Board of Governors, said in a letter e-mailed to Bloomberg News. “In its considered judgment and in view of current circumstances, it would be a dangerous step to release this otherwise confidential information,” she wrote.
FT Alphaville disclosure: IDC is 61 per cent owned by FT Group, part of Pearson.
The Fed website states that collateral handed over to the central bank by financial institutions includes stocks, subprime and structured securities such as collateralized debt obligations. Borrowers include the now-bankrupt Lehman Brothers Holdings, Citigroup and JPMorgan.
While banks would obviously oppose any release of information because it could signal further weakness, Bloomberg suggests there is a growing view that Americans don’t want to get blindsided anymore, and deserve the complete truth.
As Bloomberg puts it in its lawsuit : collateral lists “are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression.”
This all reminds FT Alphaville of a certain Tom Cruise/Jack Nicholson film…
Jessep Fed: You want answers?
Kaffee (Tom Cruise) Bloomberg: I think we’re entitled to them.
Jessep Fed: You want answers?
Kaffee Bloomberg: We want the truth!
Jessep Fed: You can’t handle the truth! Son, we live in a world that has walls in financial crisis. And that financial crisis has to be guarded by men with printing presses those walls have to be guarded by men with guns. Who’s gonna do it? You? You, Michael Bloomberg? We have a greater responsibility than you can possibly fathom. You weep for Lehman Brothers Santiago and you curse the Marines TARP. You have that luxury. You have the luxury of not knowing what we know: that Santiago’s Lehman’s death, while tragic, probably saved lives the world. And my existence, while grotesque and incomprehensible to you, saves the economy lives…You don’t want the truth. Because deep down, in places you don’t talk about at parties, you want me on that wall printing press. You need me on that wall printing press. We use words like inflation, depression, targets honor, code, loyalty…we use these words as the backbone to a life spent watching the economy defending something. You use ‘em as a punchline. We have neither the time nor the inclination to explain ourselves to a man who hasn’t even read Galbraith’s Great crash and rises and sleeps makes profits under the blanket of the very financial freedom we provide, then questions the manner in which we provide it! We’d rather you just said thank you and went on your way. Otherwise, I suggest you pick up a printing press and print away weapon and stand a post. Either way, we don’t give a damn what you think you’re entitled to!
Related link:
A few good men “You can’t handle the truth” - Youtube
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