Thank the founding fathers for the judicial branch - the only one of the three which still seems to work as originally planned. Also the only one not subject to lobbyists influence - surely, there is no connection.
I continue to marvel at the black box the Federal Reserve wants to be - it shall be the decider of things, while acting as a psuedo hedge fund, while not having to reveal what it is doing with the banks in the background because doing so will 'upset the markets'.
My question - if what the Fed is doing with the banks in dark alleys would upset the markets, maybe the Fed shouldn't be doing it. The excuse 6 months ago was pure panic and fear on what was being done would just pile emotions onto a crash state of both the economy and market. Well that's no longer a good excuse, the market has rallied 50%+ so even if what the Fed reveals causes panic we could use a 20% drop and still be up smartly from the lows. I know exposing the cockroaches to the light might upset some people but see sentence 1 of this paragraph.
Thank you Bloomberg (and Fox News which also put in a similar suit) - I just hope there is not some sort of appeal that keeps this secret brotherhood society going for another few quarters.
- The Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit. Manhattan Chief U.S. District Judge Loretta Preska ruled against the central bank yesterday, rejecting the argument that loan records arenâ€™t covered by the law because their disclosure would harm borrowersâ€™ competitive positions.
- Bloomberg said in the suit that U.S. taxpayers need to know the terms of Fed lending because the public became an â€œinvoluntary investorâ€ in the nationâ€™s banks as the financial crisis deepened and the government began shoring up companies with capital injections and loans.
- â€œWhen an unprecedented amount of taxpayer dollars were lent to financial institutions in unprecedented ways and the Federal Reserve refused to make public any of the details of its extraordinary lending, Bloomberg News asked the court why U.S. citizens donâ€™t have the right to know,â€ said Matthew Winkler, the editor-in-chief of Bloomberg News.
- The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, most put in place during the deepest financial crisis since the Great Depression, saying that doing so might set off a run by depositors and unsettle shareholders.
I hate this argument. Since the US now backstops anything that moves or has carbon based DNA just backstop every dollar of depositors money... the shells that house said money are completely irrelevant for prosperity - the business model is not evolutionary or impossible to replicate. If they die due to their bad decisions (which in theory is how the US used to work), others will take their place. Creative destruction... or something like that.
- The judge said the central bank â€œimproperly withheld agency recordsâ€ by â€œconducting an inadequate searchâ€ after Bloomberg News reporters filed a request under the information act. She gave the Fed five days to turn over documents it told the reporters it located, including 231 pages of reports, and said it must look for more at the Federal Reserve Bank of New York, which runs most of the loan programs.
- The central bank â€œessentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed,â€ Preska wrote. â€œConjecture, without evidence of imminent harm, simply fails to meet the Boardâ€™s burdenâ€ of proof.
- The Fedâ€™s balance sheet about doubled after lending standards were relaxed in the wake of the collapse of Lehman Brothers Holdings Inc. on Sept. 15, 2008. For the week ended Aug. 19, Fed assets rose 2.3 percent to $2.06 trillion as it continued to buy mortgage-backed securities under a program allowing the central bank to purchase non-government securities for the first time.
- â€œThe public deserves to know whatâ€™s being done with the money,â€ said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press. â€œThis ought to be a wake-up call for the public that they need to be far more educated about this.â€
I wish they cared Lucy, I truly do. But NFL Season starts in 2 weeks, and then American Idol in January 10, then there are the new apps to download on the iPhone - have to spend time on that, and then... well it's just hard to care about these things. They involve numbers and such... we don't do numbers in America Lucy. Unless those numbers include how much money my government will give me to shop! Make them smile with free handouts Lucy; and the pitchforks never come out. ;)
- David Skidmore, a Fed spokesman who said the boardâ€™s staff was reviewing the 47-page ruling, declined to comment on whether the central bank would appeal.
Basically the Fed is warehousing the toxic assets so the banks don't have to suffer from the consequences they birthed. We said long ago this would be the end game and the Fed would quietly suffer losses in the out year on these AAA securities. They are also of course buying mortgage bonds left and right so that the correct rate to balance risk in America is not reached - because that would not allow enough people to buy homes at 5.1% mortgage rates. In a related note - Goldman Sachs strategist Jan Hatzius says there are so many green shoots forming that the subsidization of America's economy by the Fed might in fact double yet again from here - pushing the Fed balance sheet from the current $2T to $4T. Which clearly makes sense with so much improvement in the economy.
- Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc., said the Federal Reserve could double the size of the central bankâ€™s balance sheet again if needed to support economic growth. A rise in the balance sheet to $4 trillion is a â€œpossibility,â€ Hatzius said in an interview on Bloomberg Radio in New York. â€œIt is going to depend on not just what inflation does, but also on whether the economy does move back to a slower growth pace.â€
- The size of the Federal Reserveâ€™s balance sheet has increased to $2.02 trillion as the central bank purchased assets aimed at lowering interest rates.
The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York