Fed's bank loans look like secret patronage

[Joanne98]

Fed Defies Transparency Aim in Refusal to Identify Bank Loans

By Mark Pittman, Bob Ivry, and Alison Fitzgerald
Bloomberg News
Monday, November 10, 2008

http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=h...

The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

"The collateral is not being adequately disclosed, and that's a big problem," said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. "In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin."

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

"It's your money. It's not the Fed's money," said billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York. "Of course there should be transparency."

Federal Reserve spokeswoman Michelle Smith declined to comment on the loans or the Bloomberg lawsuit. Treasury spokeswoman Michele Davis didn't respond to a phone call and an e-mail seeking comment.

The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program, or TARP, bailout plan -- without safeguards put into the TARP legislation by Congress.

... $2 Trillion

Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. The difference includes a $788 billion increase in loans to banks through the Fed and $474 billion in other lending, mostly through the central bank's purchase of Fannie Mae and Freddie Mac bonds.

Before Sept. 14, the Fed accepted mostly top-rated government and asset-backed securities as collateral. After that date, the central bank widened standards to accept other kinds of securities, some with lower ratings. The Fed collects interest on all its loans.

The plan to purchase distressed securities through TARP called for buying at the "lowest price that the secretary (of the Treasury) determines to be consistent with the purposes of this Act," according to the Emergency Economic Stabilization Act of 2008, the law that covers TARP.

... 'We Need Transparency'

The legislation didn't require any specific method for the purchases beyond saying mechanisms such as auctions or reverse auctions should be used "when appropriate." In a reverse auction, bidders offer to sell securities at successively lower prices, helping to ensure that the Fed would pay less. The measure also included a five-member oversight board that includes Paulson and Bernanke.

Contined>>>
http://gata.org/node/6858

Bushco is looting the country one last time before he goes.

[peacetalksforall]

1. They are setting themselves up to protect themselves from the collapse they are

cooking up for us. While they laugh and sneer and
raise a finger at us, the fools.

How many say the opposite - theat they are saving us.

I don't think the Cheney admin/friends ended up broke,
but they are now taking what they thought they were
going to get from the complete control - east-west
from Pakistan to Israel.

[shanti]

4. they're taking

what amounts to our social security. that's what they've been after from the very beginning.

[Democrats_win]

2. Paulson must resign! Republicans are so angry, yet not a word about this crook!

Shoot! What a joke!

[dixiegrrrrl]

3. Over a year ago Paulson floated the idea of the Fed. taking over the Treasury.

The Fed...a private banking system, taking over a Governmental agency.

Not a peep from anyone but the usual 3-4 economists like Denniger and Roubini.

Paulson gave several speeches in the usual convoluted language, they were duly printed in MSM back back pages, and on a few good but under read econ.blogs.
Then the financial "crisis" was announced, the sky was falling, all over the housing crisis, Paulson said not a word about Goldman Sachs machinations of the derivatives, or of any of the now imploding markets, but stampeded Congress into the "bailout".
made promises of accountability, the House balked, The Senate overrode what the people wanted, and said they would buy into, once again, this Admin's promises.
with Pelosi and, let's not forget, Emanuel leading the way.



So now Waxman is writing letters, Paulson has stolen all the country's remaining money, according to plans publicly announced a year ago, secretly planned for many years before that.
But we have a 40 % functional illiterate rate in this country, and close to an 85% economic illiteracy rate.