The secrecy surrounding Fed bailouts led lawmakers to demand disclosure after the central bank approved aid dwarfing the federal government’s $700 billion Troubled Asset Relief Program.
The $786B TARP Bailout is now being called, "A MASTERFUL DECEIT." Then-Secy Paulson may not have pulled a fast one when he testified in favor of the TARP before Congress----but Congress' phony outrage is a puzzlement. If HR 1424 was a 'MASTERFUL DECEIT' then CONGRESS didn't do its job.
TITLE I—TROUBLED ASSETS RELIEF PROGRAM (list of required 'Congressional Oversight' sections)
Sec. 101. Purchases of troubled assets.
Sec. 102. Insurance of troubled assets.
Sec. 103. Considerations.
Sec. 104. Financial Stability Oversight Board.
Sec. 105. Reports.
Sec. 107. Contracting procedures.
Sec. 108. Conflicts of interest.
Sec. 111. Executive compensation and corporate governance.
Sec. 116. Oversight and audits.
Sec. 118. Funding.
Sec. 119. Judicial review and related matters.
Sec. 121. Special Inspector General for the Troubled Asset Relief Program.
Sec. 125. Congressional Oversight Panel.
Sec. 127. Cooperation with the FBI.
Sec. 129. Disclosures on exercise of loan authority.
ANALYSIS In HR 1424, there are enough rules, regs and CONGRESSIONAL OVERSIGHT REQUIRED that not One Thin Dime should have been 'misspent.' So if anything crooked did go on Congress should look in a mirror. They dropped the ball -- again. Keep on mind that the same Gangster Government is running the trillion dollar O'care ripoff.
Ron Paul wants to "audit the Fed and open its books" despite having that exact ability at least twice a year, during Semiannual Report on Monetary Policy by the Fed Chairman, formerly known as the Humphrey-Hawkins testimony (RIP, 1978-2000).
We have the most transparent Fed since its inception (e.g., Bernanke was telegraphing and explaining the reasons for QE2 for several months before announcing it) but some of the Fed's monetary operations in real time should remain secret - to protect weak links and the financial integrity of the U.S. and even world's financial system from potential attacks - yet Ron Paul's intent is on being an equivalent of walking, talking financial Wikileaks...
Making the Fed less independent and more "accountable" to political interests and politicians (or better yet, "abolish" the independent central bank) is the left's long-time dream (Socialist Senator from Vermont Bernie Sanders is in the forefront of the attack on the Fed and an attempt to make the Fed and the monetary policy a scapegoat whenever it becomes obvious that fiscal and regulatory policy decisions and laws the politicians themselves enacted, have harmed the economy or the taxpayers. Central bank is an easy political target, especially in the country where it doesn't usually get much attention and its purpose and operations are little understood and where financial / economic "education" of the populace is very poor.
Specifically, for instance, new Dodd-Frank FinReg (another Full Employment Act for the U.S. lawyers) requires the Fed to disclose temporary loans - think about what it would do in the recent liquidity crisis / credit squeeze - it would expose the borrowers, the weakest large financial and non-financial institutions to the panic, attacks and raids.
For example, when the "news" headlines recently said that the Fed disclosed the details of $3.3T (or even $9T by some accounts) in PDCF "crisis loans" over two years (including a few foreign banks and non-financial U.S. entities), it created a wave of shock and awe... Imagine what kind of panic this kind of "news" would create if it happened in "real time" during the credit crunch.
Here is what headlines or most articles didn't mention about this Fed PDCF lending:
Did Fed Really Lend $9 Trillion Under Its Primary Dealer Credit Facility? - CNBC, by John Carney, 2010 December 01
Beginning in March of 2008, the Fed undertook 1,376 transactions under the facility, with loans ranging from a $10 million to nearly $48 billion. The largest single loan went to Barclays Capital on September 18, 2008 — the day after Barclays agreed to buy Lehman Brothers. The biggest borrowers were Citigroup, Merrill Lynch and Morgan Stanley, each receiving loans that total more than $1 trillion. Although the total numbers appear very large, the Fed never had anywhere near $8.95 trillion of loans outstanding under the program. The loans made under the PDCF were overnight loans, which were rapidly repaid or rolled over into new loans. This inflates the total number because the Fed counts each roll-over as a new loan. ..... < snip > ..... The Fed's data includes details on more than 21,000 transactions with financial companies and foreign central banks. The Primary Dealer Credit Facility was created in March 2008 in the wake of the collapse of Bear Stearns. It was an overnight loan facility that provided funding to primary dealers in exchange for a wide range of eligible collateral. The facility was intended to relieve pressures in the "repo" market - the overnight collateralized debt market Wall Street firms use to finance their securities portfolio. ..... < snip > Although the Federal Reserve made loans totaling $8.95 trillion to primary dealers in exchange for a wide range of collateral under its Primary Dealer Credit Facility, the size of the facility was likely never more than a fraction of that amount.
For example, Barclays is listed as borrowing $14 billion on four different subsequent days, rolling it over daily starting on September 18 2008. Yet these loans are listed as four separate $14 billion transactions which total $56B and therefore cumulatively counted as $56B, while the short-term exposure never exceeded $14B. These loans were serial (cumulative), not parallel (simultaneous) with balances repaid almost immediately, with little credit risk and making a profit for the Fed.
Basically, the Fed has assumed and was conducting the commercial paper "repo" operations in a market that had the commercial credit frozen (especially after Lehman's bankruptcy and subsequent shutdown of Reserve Primary Fund as the result of the fund's "breaking a buck" - at the time, having more than $60B in "repo" market assets) and LIBOR borrowing rates shooting up to unaffordable levels, making "normal" credit market lending all but impossible. To Bernanke's great cedit he established the facility when he saw the credit markets starting to freeze after Bear Stearns debacle, due to uncertainty of rapidly deflating assets valuations.
Strains From Financial Crisis Were Worse Than Understood - CNBC, by John Carney, 2010 December 01
Moreover, just Six Banks Got Over 98% of the Fed's PDFC Money - CNBC, by Ash Bennington, 2010 December 03
But the concentration of the vast majority of PDFC funds was far narrower than that. Institutions that ultimately went on to become just six banks — Bank of America, Citigroup, Morgan Stanley, Barclays, Goldman Sachs, and JPMorgan — received at total of about $8.78 trillion through the PDFC program. That $8.78 trillion figure represents over 98 percent of the funds lent by the PDFC program. While the numbers are dizzying, there are two important qualifications. First, PDFC lending totals represent the aggregate amount of overnight borrowing by the banks — not the amounts outstanding at any one time. ..... < snip > < snip > ..... Over the lifecycle of the PDCF program, The Federal Reserve lent a total of about $8.95 trillion to primary dealers of government securities. (This group is already a very small club: Currently, the New York Fed lists a total of 18 institutions authorized to perform this function.)
Goldman Sachs (GS) had 84 PDCF transactions with the largest being $18B in October 2008.
Morgan Stanley (MS) had 212 (largest transaction was $47B in September 2008).
Citigroup (C) used the facility almost daily until April 2009 (largest was almost $18B in November 2008).
Bank of America (BAC) used the facility more than 1000 times, almost daily until May 2009 (largest was $11B in October 2008).
J.P.Morgan (JPM) used PDCF only once in September 2008 and twice in October 2008, but it used the facility almost daily since acquisition of Bear Stearns from late March 2008 through June 2008.
If Ron Paul joins Bernie Sanders, Dennis Kucinich and other politicians who want to politicize the institution of the Central Bank by "auditing" or "abolishing" the Fed (to make the accountability for the debt their own irresponsible fiscal policies, budgets and pork-laden bills create) then it's fair to ask - with friends like these who needs enemies?
If "sane" Ron Paul and the "Kings of pork" House committees chairmen become the faces of Republican Party in the new Congress, then GOP didn't learn anything about the responsibility of being in power and 2012 (and beyond) will be much more difficult than it needs to be...