U.S. GOV REFUSES TO DISCLOSE RECIPIENTS OF $2 TRILLION…..?

[Anonymous]

http://www.bloomberg.com/apps/news?pid=20601109&sid=apx7XNLnZZlc&refer=home
Fed Refuses to Disclose Recipients of $2 Trillion
Dec.
08 — The Federal Reserve refused a request by Bloomberg News to
disclose the recipients of more than $2 trillion of emergency loans
from U.S. taxpayers and the assets the central bank is accepting as
collateral.Bloomberg filed suit Nov. 7 under the U.S. Freedom of
Information Act requesting details about the terms of 11 Fed lending
programs, most created during the deepest financial crisis since the
Great Depression.The Fed responded Dec. 8, saying it’s allowed to
withhold internal memos as well as information about trade secrets and
commercial information. The institution confirmed that a records search
found 231 pages of documents pertaining to some of the requests.“If
they told us what they held, we would know the potential losses that
the government may take and that’s what they don’t want us to know,”
said Carlos Mendez, a senior managing director at New York-based ICP
Capital LLC, which oversees $22 billion in assets.The Fed stepped into
a rescue role that was the original purpose of the Treasury’s $700
billion Troubled Asset Relief Program. The central bank loans don’t
have the oversight safeguards that Congress imposed upon the TARP.Total
Fed lending exceeded $2 trillion for the first time Nov. 6. It rose by
138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when
central bank governors relaxed collateral standards to accept
securities that weren’t rated AAA.

‘Been Bamboozled’
Congress
is demanding more transparency from the Fed and Treasury on bailout,
most recently during Dec. 10 hearings by the House Financial Services
committee when Representative David Scott, a Georgia Democrat, said
Americans had “been bamboozled.”Bloomberg News, a unit of New
York-based Bloomberg LP, on May 21 asked the Fed to provide data on
collateral posted from April 4 to May 20. The central bank said on June
19 that it needed until July 3 to search documents and determine
whether it would make them public. Bloomberg didn’t receive a formal
response that would let it file an appeal within the legal time
limit.On Oct. 25, Bloomberg filed another request, expanding the range
of when the collateral was posted. It filed suit Nov. 7.In response to
Bloomberg’s request, the Fed said the U.S. is facing “an unprecedented
crisis” in which “loss in confidence in and between financial
institutions can occur with lightning speed and devastating effects.”

Data Provider
The
Fed supplied copies of three e-mails in response to a request that it
disclose the identities of those supplying data on collateral as well
as their contracts.While the senders and recipients of the messages
were revealed, the contents were erased except for two phrases
identifying a vendor as “IDC.” One of the e-mails’ subject lines refers
to “Interactive Data — Auction Rate Security Advisory May 1,
2008.”Brian Willinsky, a spokesman for Bedford, Massachusetts- based
Interactive Data Corp., a seller of fixed-income securities
information, declined to comment.“Notwithstanding calls for enhanced
transparency, the Board must protect against the substantial, multiple
harms that might result from disclosure,” Jennifer J. Johnson, the
secretary for the Fed’s Board of Governors, said in a letter e-mailed
to Bloomberg News.

‘Dangerous Step’
“In its considered
judgment and in view of current circumstances, it would be a dangerous
step to release this otherwise confidential information,” she wrote.New
York-based Citigroup Inc., which is shrinking its global workforce of
352,000 through asset sales and job cuts, is among the nine biggest
banks receiving $125 billion in capital from the TARP since it was
signed into law Oct. 3. More than 170 regional lenders are seeking an
additional $74 billion.Fed Chairman Ben S. Bernanke and Treasury
Secretary Henry Paulson said in September they would meet congressional
demands for transparency in a $700 billion bailout of the banking
system.The Freedom of Information Act obliges federal agencies to make
government documents available to the press and public. The Bloomberg
lawsuit, filed in New York, doesn’t seek money damages.

‘Right to Know’
“There
has to be something they can tell the public because we have a right to
know what they are doing,” said Lucy Dalglish, executive director of
the Arlington, Virginia-based Reporters Committee for Freedom of the
Press.“It would really be a shame if we have to find this out 10 years
from now after some really nasty class-action suit and our financial
system has completely collapsed,” she said.The Fed’s five-page response
to Bloomberg may be “unprecedented” because the board usually doesn’t
go into such detail about its position, said Lee Levine, a partner at
Levine Sullivan Koch & Schulz LLP in Washington.“This is uncharted
territory,” said Levine during an interview from his New York office.
“The Freedom of Information Act wasn’t built to anticipate this
situation and that’s evident from the way the Fed tried to shoehorn
their argument into the trade-secrets exemption.”The Fed lent cash and
government bonds to banks that handed over collateral including stocks
and subprime and structured securities such as collateralized debt
obligations, according to the Fed Web site.Borrowers include the
now-bankrupt Lehman Brothers Holdings Inc., Citigroup and New
York-based JPMorgan Chase & Co., the country’s biggest bank by
assets.Banks oppose any release of information because that might
signal weakness and spur short-selling or a run by depositors, Scott
Talbott, senior vice president of government affairs for the Financial
Services Roundtable, a Washington trade group, said in an interview
last month.

‘Complete Truth’
“Americans don’t want to get
blindsided anymore,” Mendez said in an interview. “They don’t want it
sugarcoated or whitewashed. They want the complete truth. The truth is
we can’t take all the pain right now.”The Bloomberg lawsuit said the
collateral lists “are central to understanding and assessing the
government’s response to the most cataclysmic financial crisis in
America since the Great Depression.”In response, the Fed argued that
the trade-secret exemption could be expanded to include potential harm
to any of the central bank’s customers, said Bruce Johnson, a lawyer at
Davis Wright Tremaine LLP in Seattle. That expansion is not contained
in the freedom-of-information law, Johnson said.“I understand where
they are coming from bureaucratically, but that means it’s all the more
necessary for taxpayers to know what exactly is going on because of all
the money that is being hurled at the banking system,” Johnson said.The
Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal
Reserve System, 08-CV-9595, U.S. District Court, Southern District of
New York (Manhattan).

[Author]

December 29, 2008 at 9:46 AM