The Fed should offer full transparency. These are the reasons the Fed gives for secrecy:

“The Fed argued that allowing disclosure could stigmatize banks, causing a loss of confidence that could lead to deposit runs, bank failures and damage to the economy.”

The fact that the Fed fears a liquidity crisis is evidence that it doesn’t understand banking.
With the FDIC offering deposit insurance for up to 100% of any bank’s liabilities, it should be clear to the Fed the liability side of banking is not the place for market discipline. Liquidity should not be an issue and it should be provided in unlimited quantities at all times, much like most of the rest of the world’s central banks have been doing for a long time.

All the Fed has to do is simply trade in the fed funds market and offer any bank unlimited funding at the Fed’s target interest rate, and turn all of their focus on regulating the asset side of banking where it belongs.

The Fed should be audited NOW, and get this issue behind them as soon as possible.

See this and the rest of my proposals, thanks.

Fed in emergency bid to put bailout ruling on hold

Aug 25 (Reuters) — The Federal Reserve asked a U.S. appeals court to delay implementing a ruling that would force the central bank to disclose details of its emergency lending programs to banks during the financial crisis.

Wednesday’s emergency request for a 90-day delay came after the U.S. Second Circuit Court of Appeals on August 20 denied a motion by the Fed to rehear the case, which had been brought by Bloomberg LP, the parent of Bloomberg News, and News Corp’s Fox News Network.

A stay would give the Fed and the Clearing House Association, a group of major U.S. and European banks, until November 18 to appeal the ruling to the U.S. Supreme Court.

The Fed programs were designed to shore up the financial markets, and more than doubled the central bank’s balance sheet to well over $2 trillion, especially after the September 2008 collapse of Lehman Brothers Holdings Inc.

In March, the Second Circuit ordered the Fed to disclose information, including the names of bailout recipients and amounts received, that the news media had requested under the federal Freedom of Information Act.

The Fed argued that allowing disclosure could stigmatize banks, causing a loss of confidence that could lead to deposit runs, bank failures and damage to the economy.

In its Wednesday filing, the Fed said denial of a stay would “force the government to let the cat out of the bag, without any effective way of recapturing it” if the Second Circuit ruling were later reversed.

“The public policy interest identified by the government will be irreversibly lost,” it added.

Fed spokesman David Skidmore said “the stay is necessary to permit the board to consult with the Department of Justice regarding an appeal to the Supreme Court.”

15 Responses

  1. What are rules for deposit insurance ? Any link to an FDIC document ?

    I believe it was $100,000 and was raised to $250,000 during the crisis. I could be wrong but this (any kind of insurance) may have been only for households, not corporates’ deposits.

    In that case, isn’t it good to keep this a secret ?

  2. “The Fed argued that allowing disclosure could stigmatize banks, causing a loss of confidence that could lead to deposit runs, bank failures and damage to the economy.”

    Under what circumstances is hiding this information better than not hiding it? Only when there is the potential insider trading of some sort – and you’re an insider.

    The FED is a public utility. People that use public utilities to the extent of billions of dollars should be forced to be transparent about it.

  3. even if FDIC is made unlimited (good idea) there are still other fed liabilities, like debt, that it does not and should not cover. so some liabilities are still material — what about those?

    also, even with unsecured and unlimited lending at discount window, liquidity can still impact marginal Cost of Capital. If firm is undercapitalized now, then higher CoC materially impacts its performance. What about that?

    1. Think of of a casino, which have lenders who take priority over shareholders, but holding a super-priority over all are the customers holding chips. Every state gaming law requires that they must be first in lie before anyone else gets paid. But there black swan events and all that, so the federal government could decide to go into the casino regulation business to protect the gaming customer. This would only help the casino industry, by instilling confidence in every casino you go to (since Uncle Sam stands behind all of them).

      So a Federal Department for Insuring Chips could step in to make sure every customer could get paid out at any time and without limit (fortunately, the FDIC has a sister agency that has a monopoly on creating chips and markers, so its no burden at all). it wouldn’t be FDIC’s problem if the shareholders get stiff, lenders take a haircut or management gets whacked buried out in a National Park, that’s the Park Rangers’ problem.

      The big problem here is that government officials, specifically at the Tsy and the Fed, have forgotten who they owe their duty of loyalty, its not to the management, shareholders or lenders but rather to the customers.

      1. This I am all aware of Beauwulf.

        My point is that Warren spoke about backing all liability, and did not distinguish between lenders and depositors. This is big impact for many reasons, one of smaller ones is direct impact on CoC channel if lenders start taking haircuts.

        Warren says liability side should have NO market discipline. This means lenders get FDIC insurance too, not just borrwers. This is quite a step far.

      2. the liability side is not the place for market discipline means the govt should lend unsecured to its member banks without limit.

        bank assets/capital are what need to be 100% regulated.

      3. Ok, but what about bank bond holders?

        They were the biggest recipients of bailout. You want to extend FDIC to them too?

      4. some of the bonds were capital notes, which are in a second loss position to equity, etc.

        some were just unsecured debt to fund assets.

        the bank sold those presumably because they were able to do so at a lower rate than fdic insured deposits.

        so i see no reason to not have them insured as well. it’s not like the borrower got more interest for taking more risk.

  4. In its Wednesday filing, the Fed said denial of a stay would “force the government to let the cat out of the bag, without any effective way of recapturing it” if the Second Circuit ruling were later reversed.

    At least the Fed is admitting to the Court that its part of “the government” (in legal terms, that means the executive branch), I suppose that’s progress. The Fed’s “fourth branch of government” status drives me nuts, seeing as the Constitution saw fit to mention three branches. The Fed (FRB and Fed Bank presidents alike) exercise executive power and as such should be under the direct authority of the president (Art II, Sec. 1, “The executive power shall be vested in a President of the United States of America”). If we can trust the man not to blow up the world, I think we can trust him to not blow up the money supply. (see third comment down)

    1. Gee, Beowulf, now that you remind us, I realize that we actually are trusting POTUS not to blow up the world. We really need to rethink this and give the black box to a small group of unelected and unaccountable technocrats. Oh right, we already have one, the Fed BOG. Why don’t we just give the chairman the black box with the codes.

      1. Which they’d immediately lend out on the overnight market at 0.025% interest. Don’t worry our innovative financial system will use the power of market forces to prevent a nuclear war– but in case it doesn’t, the discount window will still be open, right?


    The Federal Reserve recently announced that it would be repeating their previous con-game trick called “Quantitative Easing” that they say is designed to save the American economy. “Quantitive Easing” is a process by which the Federal Reserve and the U.S. Treasury conspire to print a massive amount of new “fiat money” backed by absolutely nothing in order for the Federal Reserve to buy American government debt. In other words, they are using phoney money to buy back their own debt. Don’t you wish you could pay off your debts, just by printing your own dollars backed up by absolutely nothing? Please tell me how this move by the Federal Reserve helps the American people?

    You see, when the Federal Reserve and the U.S. Treasury enter into a criminal conspiracy to print more fiat money, it puts more American dollars into circulation, which in turn lowers the value of the American dollar, which in turn causes you to pay more dollars to buy the same things you bought at a lower price a month or two before. Our money is worth less; it causes inflation and our cost of living goes up. Please tell me how this move by the Federal Reserve helps the American people?

    You say you don’t believe me. Well, take a look at the Commodity Research Bureau (CRB) Index. The CRB index tracks the prices of a basket of goods. The Index just hit a new 52-week high at the end of October 2010. Here are some examples that you probably have noticed in the supermarket and retail stores recently. It tells you how much prices have gone up in the last 12 months:

    COTTON – price up 85 percent; SILVER – price up 51 percent; COFFEE – price up 50 percent; CORN – price up 41 percent; GOLD – price up 30 percent; SOYBEANS – price up 28 percent; SUGAR – price up 27 percent; COPPER – price up 26 percent; and WHEAT – price up 25 percent.

    The new round of “Quantitative Easing” by the Federal Reserve, might include the printing of as much as $2 trillion or more of worthless fiat dollars and placing these new dollars into the economy. This will cause prices of commodities go higher once again and “tax” you via inflation even more. Please tell me how this move by the Federal Reserve helps the American people?

    Let’s say I and a couple of my associates decided that through some sort of criminal trickery, we could cheat our fellow Americans out of their money, or at least make their money less valuable, while we made $Millions or even $Billions of dollars.. We would be considered an organized criminal enterprise and would eventually be prosecuted for operating an organized “Scheme to Defraud” by the federal government.

    Why then do the American people and their elected representatives stand by and allow a private group of Banksters called the Federal Reserve, who conspire with government officials and other fellow travelers, to cheat the American people out of $Trillions of dollars of their hard earned money, or at least make it less valuable, without being charged with a crime?

    To top it off, the privately owned Federal Reserve has been manipulating our economy for 97 years and we still don’t even know who the private shareholders of the organization are. This group of Elites are a very secret group of anonymous individuals and organizations who are very well insulated from public scrutiny, just like other high level criminal enterprise leaders. Yet, the American people remain at their mercy as these criminals attain super wealth status because they are permitted to manipulate and control our entire economy from behind a curtain secrecy, bribery and corruption.

    Why has the Federal Reserve not been thoroughly audited since it was created in 1913?
    Why has the Federal Reserve resisted every attempt to be audited? and
    Why do our elected representatives seem reluctant to audit the Fed?

    The answer is simple. The Federal Reserve is a criminal enterprise and a complete audit would clearly show that it has been involved in illegal activity for a very long time, with the cooperation of many of our elected and appointed federal officials and a small group of Wall Street firms and private financial institutions. How then can the American people continue to allow this secret, private organization, whose shareholders remain unknown, to run our economy?

    It is definitely time for a full fledged congressional investigation and a separate criminal investigation of these globalist crooks. These Banksters at the Federal Reserve, along with their federal government co-conspirators, have stolen $Billions if not $Trillions of dollars from the American taxpayers by means of fraud, counterfeiting and participation in an ongoing criminal enterprise with other private financial entities.

    The process of printing worthless, phoney money is called counterfeiting and it is still a crime. Not only should the Federal Reserve be audited as soon as possible, but the limited number of Bankster shareholders of the private Federal Reserve should be identified, investigated and prosecuted under the The Racketeer Influenced and Corrupt Organizations Act (commonly referred to as RICO Act or RICO).

    RICO is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. While the law’s original intended use was to prosecute the Mafia as well as others who are actively engaged in traditional organized criminal enterprises, its application clearly can be used against the Federal Reserve Banksters, along with their federal government and private financial institution co-conspirators.

    Any reasonable person can clearly see that there are many individuals associated with the Federal Reserve, including its shareholders and emloyees, along with elected and appointed federal government officials, who have been involved in a long term criminal conspiracy through their coordinated manipulation of our entire economic system. These white-collar criminals have illegally destroyed the value of the dollar and weakened the country financially, while at the same time, making $Billions of dollars in illegal profits for themselves and their co-conspirators, all at the expense of the American people.

    It’s time to stop them! It’s time to investigate and prosecute them as the criminals they are!

    For Liberty,

    John Wallace
    Chatham, NY

    1. John, you have no idea what you are talking about.

      The real problem with QE is that it does absolutely nothing of consequences, apart from getting people all riled up about it and setting off misguided speculative bubble buying that ends badly. Japan has done more QE than the US is even dreaming of, their debt is 3x as high, and there not only has been no ‘currency debasement/inflation’ but they are still fighting deflation and a currency they believe is too strong, and all that with a rapidly aging population.

      Come back after you take a quick read of ‘the 7 deadly innocent frauds’ at on this website.

    2. Conspiracy theory.

      On the other hand, there are a number of people (including me) that recommend the Fed be explicitly consolidated with the Treasury. This would eliminate such confusion and conspiracy theories, and, more importantly, it would end the reign of a small group of unelected and unaccountable technocrats over US monetary policy, which is both anti-capitalistic and anti-democratic.

      While we are at it, let’s also recognize operational reality by removing the political requirement for a $-4-$ tsy issuance offset for deficits and instituting ZIRP as the basis of monetary policy.

      1. right, set rates at 0 permanently and let the fed concentrate on regulation

        and for now confine the tsy sec to signing the money and running the secret service

        and i’d also appoint the highest ranking civil servant to run it all after consolidation.

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