Two posts ago, I said this:
First it was only banks that got special protection. Then investment banks.
Then an insurance company. Now maybe the auto industry. The list will stop when
the government stops sending good money to chase after bad.
And today,
we have evidence that the government has no intention of stopping. (You may have seen this link on
Drudge but I'm giving it to you anyway.) Today it is being reported that in addition to the $700 billion that we already know about, the Fed has loaned some $2 trillion--that's $2,000,000,000,000--to troubled firms,
and is refusing to disclose who is getting the money:
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.
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 news agency (Bloomberg) that published this story has filed a FOIA lawsuit to obtain the lending records, but it's appalling that the government requires a lawsuit to disclose spending $2 trillion. In lieu of working this week, I predict that I will be adrift in daydreams, pondering reforms to the Federal Reserve System, and wondering what might have been if I hadn't been tragically denied admission into the graduate economic program at the University of Maryland.
3 comments:
oooh oooooh I want a bail out tooooo.
The Fed is transparent in that it is subject to the oversight of
Congress. Is twice a year not fast enough? The intent of Congress in
shaping the Federal Reserve Act was to keep politics out of monetary
policy. Legislation requires that the Federal Reserve reports annually
on its activities to the Speaker of the House of Representatives.
http://nomdeals.blogspot.com
The sanctity of the Fed's political independence extends only to monetary policy. When the Fed starts deciding which companies are worthy of taxpayer money, they are/should be subject to normal political constraints.
The beauty of open market operations is that the Fed cannot make the "who" decision. If it wants to affect the macroeconomy, it can inject or remove cash, but how the new money supply is allocated amongst economic players is entirely dependent on those players themselves, and not political determinations.
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