Monday, November 10, 2008
Bloomberg journalists stir needless concerns about Fed actions. Could harm Fed's ability to help financial sector.
An article on Bloomberg.com suggested that the Fed has been hiding behind a lack of transparency. The Bloomberg journalists do not understand that Fed lending is to banks with regulated collateral and all of that is publicly available information.
Here is the article.
The misinformation in the Bloomberg article could put pressure on the Fed that might result in hurting its ability to help the financial markets. We must try to stop journalistic ignorance and complicity in this time of crisis.
Please cut and paste the following letter and send it to the following Bloomberg journalists:
alack@bloomberg.net
mpittman@bloomberg.net
bivry@bloomberg.net
afitzgerald2@bloomberg.net
It is clearly stated under Section 13 Paragraph 3 of the Federal Reserve Act that in exigent and unusual circumstances the Fed is allowed to lend to whomever it pleases against any collateral that it deems satisfactory.
http://www.federalreserve.gov/aboutthefed/section13.htm
Moreover, all banks come under regulatory scrutiny by the Fed and Office of the Controller of the Currency and can only have bank-regulated collateral. The list can be found at the Fed’s Discount Window of Marginable Collateral.
http://www.frbdiscountwindow.org/discountmargins.xls
The Fed is not limiting transparency in its actions. All this information is publicly available. Your research and assertions are incorrect and misleading and you should publish a retraction with the proper information.
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6 comments:
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
Add Lou Dobbs to the list of ignorant members of the media on this issue. His evening poll ended with 99% in favor of the Fed disclosing the names of loan recipients. Not a big surprise after ranted on and on about it for an hour.
Scott Fullwiler
Yes, the intent was to keep politics out of the process, although it does tend to influence through "osmosis" at times. This time, however, the risk is that widespread ignorance forces more direct political meddling in the Fed's activities.
ALL commercial banks have access to the Fed if needed. This is nothing new. (Although some non-bank entities that have been helped as well, recently.) If Lou Dobbs wants to know, he can start with the list of the 7,000+ commercial banks in the U.S.
Right. Great point about the 7k commercial banks--and, of course, the Fed's already lending them $100b in intraday credit at peak settlement times every day under normal circumstances.
Regarding the $2 trillion, almost $500b is outright holdings of Tsy securities, another $600b is the currency swaps to already named central banks. So, there's $1.1 trillion.
Scott Fullwiler
Scott,
Excellent point on the FX holdings by the Fed. In two months this number has grown to nearly the size of the "bailout." The media and most economists are clueless about this or for some reason it doesn't seem to bother them that the Fed has lent on an pretty much uncollateralized basis.
This is really interesting because I think the best way to help the financial sector is first buy generic viagra and then selling it everywhere.
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