I came across this article, talks about how our two trillion dollars (I thought it was less than one) is being spent.
Evidently, we aren’t allowed to see who gets what or what collateral is used for the loan portions. I don’t get why this needs to be secret, not to mention being amazed that all this talk of transparency seems to now be thrown out the window.
What is the reason for keeping things secret? Is it a good idea? Bad idea? Here’s some explanation, thin as it may be.
Thoughts?
I think part of the reason is so nervous investors don’t pull out of companies that have accepted money thinking they are doomed. Publicly admitting you need help negatively alters investor’s perceptions. In a time where people are afraid to lend money, perceptions matter. It may be bad form in terms of government accountability, but I think it makes sense from a business perspective.
haha
did y’all hear the one about the failed bank exec who got hired by the Feds to oversee bank health?
OMFG is that funny or what? This whole bailout thingy is a laugh riot!
OMG it just gets funnier and funnier!
I couldn’t make this stuff up! I can’t stop laughing!
As Homer said: It’s funny 'cause it’s true!
My whole problem with this bailout (other than the whole “no transparency, no accountability” thing) is that they’ve essentially just handed over a boatload of money to people who have just finished proving that they cannot be trusted with money.
The problem is the people operating the system, not the system.
That’s two million million dollars, guys.
It’s like giving someone a million dollars a million times and then doubling the entire amount.
I’m pissed off.
Bloomberg is pissed that their FOIA request wasn’t approved.
As the article noted, the $700 billion program is wholly separate from the $2 trillion one. The latter is a modification of ordinary Federal Reserve open market operations. (I think.)
Admittedly Calculated Risk thinks that the Fed should disclose.
Here’s a counter argument.
It’s an emergency. Those who are borrowing money at this glorified discount window don’t want the details splashed across the pages of the financial press. If they are forced to do so, they will be less reluctant to borrow funds.
But if they don’t borrow funds, they won’t lend. Personally, I’m willing to cut corners in an emergency in order to obtain a milder recession.
Disclosure: I frankly don’t know the details of this Federal Reserve program, which explains why I’ve characterized it in 2 contradictory ways above.
Background: As it happens Bernanke is one of the bigger advocates for transparency of Federal Reserve operations, at least during normal times. That’s been the trend: in the 1980s and earlier the Fed was far more secretive.
My first thought was that anyone who believes a word that Barney Frank has to say about finance and loans is an idiot.
He is the Chairman of the House Financial Services Committee, after all.
I think that’s his point. Look where we are.
That’s a great way to wrap your head around that amount. Now I’m even more pissed.
Elijah Cummings (D-Md.) called for the resignation of AIG CEO Edward Liddy today.
AIG responded with a press release saying that the events has been “mischaracterized”.
A group called Taxpayers for Common Sense had the best line tho:
There’s a story posted at abcnews.com.
Aye. But Joseph Hazelwood still knows more about oil-tanker navigation than you do.
Pity you always have a partisan knee jerk in reacting to anything said by someone from the “other side.”
Actually Frank’s comments seem quite reasonable. The US Central Bank’s concerns about the impact of extensive disclosure are hardly unique - similar discussions about similar emergency liquidity arrangements in the UK and Europe have occurred. It would seem to me that given these emergency windows at Central Banks have been historically rather little used due to the “signaling” nature (that is, your bank is right fucked in terms of liquidity), that the markets are just pulling back from a panic that threatened to be really world-historical in a bad way, and that you want to unlock liquidity as much as possible, prudence would suggest not being terribly detailed in disclosure. Even looking at some of the critics there, one can smell speculators looking for angles of attack. That strikes me as a formula for rendering the US rescue rather more expensive.
Yeah, wider range of collateral accepted for the loans.
Emphasis added.
Precisely, and this is not just a concern by the US central bank.
An eventual disclosure and accounting of course is necessary, but in the midst of the emergency, one would think that would not be a great way to calm things down.
Why? Lack of confidence in the Central Bank’s risk management?
I certainly hope so. For all our sakes. I really hope I’m wrong about the bailout being wrongheaded. but these guys don’t instill a lot of confidence.
Because things got SO fucked up.
Be glad that it’s not 1929-1933. Bernanke and his team have worked very hard to prevent the Great Depression from occurring again.
The Federal Reserve lends out billions per year during normal times. That’s what central banks do, both directly via the discount window and also by trading bonds on the open market. Earlier this year they adjusted collateral requirements. Bloomberg wants specifics.
I would give it to them, in seven years or so.
This is very different from the $700 billion rescue package. That involves a purchase of assets or shares held by financial institutions. The 700 plan is operated by the Treasury (not the Fed) and is not a mere extension of ordinary policies, unlike the topic of the OP.