# The secret spending of our $2,000,000,000,000. **URL:** \ **Category:** Great Debates\ **Created:** [November 10, 2008, 6:32pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076 "2008-11-10T18:32:56Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [November 10, 2008, 6:32pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/1 "2008-11-10T18:32:56Z")
[I came across this article](http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide), talks about how our two trillion dollars (I thought it was less than one) is being spent. > [@](#): > > Nov. 10 (Bloomberg) – 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.‘’ 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. > [@](#): > > In an interview Nov. 6, House Financial Services Committee Chairman Barney Frank said the Fed’s disclosure is sufficient and that the risk the central bank is taking on is appropriate in the current economic climate. Frank said he has discussed the program with Timothy F. Geithner, president and chief executive officer of the Federal Reserve Bank of New York and a possible candidate to succeed Paulson as Treasury secretary. > > `I talk to Geithner and he was pretty sure that they're OK,'' said Frank, a Massachusetts Democrat. `If the risk is that the Fed takes a little bit of a haircut, well that’s regrettable.‘’ Such losses would be acceptable, he said, if the program helps revive the economy. > > `Unclog the Market’ > > Frank said the Fed shouldn’t reveal the assets it holds or how it values them because of `delicacy with respect to pricing.'' He said such disclosure would `give people clues to what your pricing is and what they might be able to sell us and what your estimates are.‘’ He wouldn’t say why he thought that information would be problematic. > > Revealing how the Fed values collateral could help thaw frozen credit markets, said Ron D’Vari, chief executive officer of NewOak Capital LLC in New York and the former head of structured finance at BlackRock Inc. > > `I'd love to hear the methodology, how the Fed priced the assets,'' D'Vari said. `That would unclog the market very quickly.‘’ Thoughts? ---
**Author:** ![brickbacon](https://avatars.discourse-cdn.com/v4/letter/b/898d66/32.png) [@brickbacon](https://boards.straightdope.com/u/brickbacon)\ **Post date:** [November 10, 2008, 7:20pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/2 "2008-11-10T19:20:27Z")
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. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [November 10, 2008, 7:38pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/3 "2008-11-10T19:38:28Z")
[Pit thread.](http://boards.straightdope.com/sdmb/showthread.php?t=492181) ---
**Author:** ![Snowboarder\_Bo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowboarder_bo/32/229_2.png) [@Snowboarder\_Bo](https://boards.straightdope.com/u/Snowboarder_Bo)\ **Post date:** [November 10, 2008, 10:53pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/4 "2008-11-10T22:53:18Z")
haha did y’all hear the one about the [failed bank exec who got hired by the Feds to oversee bank health](http://abcnews.go.com/Blotter/WallStreet/story?id=6180235&page=1)? > [@](#): > > Michael Alix was head of risk management for Bear Stearns for two years until the institution imploded this spring, a victim of its (risky) subprime-mortgage related investments. > > Last Friday, the Federal Reserve Bank of New York quietly announced it had hired Alix to advise it on bank supervision. OMFG is that funny or what? This whole bailout thingy is a laugh riot! ---
**Author:** ![Snowboarder\_Bo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowboarder_bo/32/229_2.png) [@Snowboarder\_Bo](https://boards.straightdope.com/u/Snowboarder_Bo)\ **Post date:** [November 10, 2008, 11:01pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/5 "2008-11-10T23:01:26Z")
OMG it just gets funnier and funnier! [Another AIG Resort “Junket”: Top Execs Caught on Tape KNXV Discovers $343,000 Secret Gathering, AIG Signs and Logos Hidden](http://abcnews.go.com/Blotter/WallStreet/story?id=6223972&page=1) > [@](#): > > Even as the company was begging the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret gathering at a luxury resort in Phoenix last week. > [@](#): > > KNXV said the president of AIG unit Royal Alliance Associates, Art Tambaro, stayed in a two-story Casita suite and worked out at the spa while others participated in seminars. > [@](#): > > In addition to Roth and Tambaro, the AIG executives who spent last week at the Phoenix resort, according to KNXV, were Mark Schlafly, president and CEO, FSC Securities’ Gary Bender, senior vice president, Investment Advisory Services; and Stuart Rogers, senior vice president. I couldn’t make this stuff up! I can’t stop laughing! As Homer said: It’s funny 'cause it’s true! ---
**Author:** ![jk1245](https://avatars.discourse-cdn.com/v4/letter/j/49beb7/32.png) [@jk1245](https://boards.straightdope.com/u/jk1245)\ **Post date:** [November 10, 2008, 11:07pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/6 "2008-11-10T23:07:27Z")
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. ---
**Author:** ![accidentalyuppie](https://avatars.discourse-cdn.com/v4/letter/a/59ef9b/32.png) [@accidentalyuppie](https://boards.straightdope.com/u/accidentalyuppie)\ **Post date:** [November 10, 2008, 11:12pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/7 "2008-11-10T23:12:13Z")
> [@magellan01](#): > > [I came across this article](http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide), talks about how our two trillion dollars (I thought it was less than one) is being spent. 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. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [November 11, 2008, 5:28am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/8 "2008-11-11T05:28:57Z")
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](http://calculatedrisk.blogspot.com/2008/11/bloomberg-sues-fed-to-force-disclosure.html) 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. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [November 11, 2008, 5:41am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/9 "2008-11-11T05:41:34Z")
My first thought was that anyone who believes a word that Barney Frank has to say about finance and loans is an idiot. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [November 11, 2008, 7:15am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/10 "2008-11-11T07:15:39Z")
> [@Sam\_Stone](#): > > 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. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [November 11, 2008, 7:38am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/11 "2008-11-11T07:38:49Z")
> [@BrainGlutton](#): > > 😕 He **is** the Chairman of the House Financial Services Committee, after all. I think that’s his point. Look where we are. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [November 11, 2008, 7:39am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/12 "2008-11-11T07:39:50Z")
> [@accidentalyuppie](#): > > 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. That’s a great way to wrap your head around that amount. Now I’m even more pissed. ---
**Author:** ![Snowboarder\_Bo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowboarder_bo/32/229_2.png) [@Snowboarder\_Bo](https://boards.straightdope.com/u/Snowboarder_Bo)\ **Post date:** [November 11, 2008, 10:11pm UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/13 "2008-11-11T22:11:45Z")
Elijah Cummings (D-Md.) called for the resignation of AIG CEO Edward Liddy today. > **[Cummings\_to\_AIG.pdf](https://abcnews.com/images/Blotter/Cummings_to_AIG.pdf)** > > 187.73 KB > [@Elijah Cummings](#): > > AIG can take a first step toward meeting these expectations by providing the information I requested and by accepting your resignation from the positions of chairman and chief executive officer. [AIG responded with a press release](http://abcnews.go.com/images/Blotter/AIG%20Response%20(Nov%2011%202008%20FINAL).pdf) saying that the events has been “mischaracterized”. A group called Taxpayers for Common Sense had the best line tho: > [@Stephen Ellis](#): > > AIG officials are obviously sensitive to public perception. Just look at how they hid their sponsorship and logos. There’s a [story posted at abcnews.com](http://abcnews.go.com/Blotter/WallStreet/story?id=6230818&page=1). ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [November 12, 2008, 12:04am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/14 "2008-11-12T00:04:17Z")
> [@magellan01](#): > > I think that’s his point. Look where we are. Aye. But [Joseph Hazelwood](http://en.wikipedia.org/wiki/Joseph_Hazelwood) still knows more about oil-tanker navigation than you do. ---
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [November 12, 2008, 12:35am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/15 "2008-11-12T00:35:42Z")
> [@Sam\_Stone](#): > > My first thought was that anyone who believes a word that Barney Frank has to say about finance and loans is an idiot. 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. ---
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [November 12, 2008, 12:39am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/16 "2008-11-12T00:39:08Z")
> [@Measure\_for\_Measure](#): > > 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.) Yeah, wider range of collateral accepted for the loans. > [@](#): > > 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. 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. ---
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [November 12, 2008, 12:42am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/17 "2008-11-12T00:42:58Z")
> [@magellan01](#): > > That’s a great way to wrap your head around that amount. Now I’m even more pissed. Why? Lack of confidence in the Central Bank’s risk management? ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [November 12, 2008, 3:35am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/18 "2008-11-12T03:35:07Z")
> [@BrainGlutton](#): > > Aye. But [Joseph Hazelwood](http://en.wikipedia.org/wiki/Joseph_Hazelwood) still knows more about oil-tanker navigation than you do. 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. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [November 12, 2008, 3:38am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/19 "2008-11-12T03:38:27Z")
> [@wmfellows](#): > > Why? Lack of confidence in the Central Bank’s risk management? Because things got SO fucked up. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [November 12, 2008, 4:50am UTC](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076/20 "2008-11-12T04:50:04Z")
> [@magellan01](#): > > 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. [Next page](https://boards.straightdope.com/t/the-secret-spending-of-our-2-000-000-000-000/472076.md?page=2)