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Magda Hassan
11-11-2008, 12:46 PM
Bloomberg is suing to find out who got the $2 trillion 'loans'. Transparency was agreed on as a condition of the loans but now the Federal Reserve wont say who got what or what the conditions are.

Fed Defies Transparency Aim in Refusal to Disclose (Update2)
By Mark Pittman, Bob Ivry and Alison Fitzgerald
http://www.bloomberg.com/apps/data?pid=avimage&iid=iYrgCN6FC5Bs
http://images.bloomberg.com/r06/news/enlarge_details.gif (http://www.bloomberg.com/apps/news?pid=photos&sid=aOngFPgq7r3M)

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.
Fed Chairman Ben S. Bernanke (http://search.bloomberg.com/search?q=Ben+S.+Bernanke&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) and Treasury Secretary Henry Paulson (http://search.bloomberg.com/search?q=Henry%0APaulson&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.
``The collateral is not being adequately disclosed, and that's a big problem,'' said Dan Fuss (http://search.bloomberg.com/search?q=Dan+Fuss&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. ``In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.''
Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information (http://www.usdoj.gov/oip/) Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.
The Fed (http://www.frbdiscountwindow.org/cfaq.cfm?hdrID=21&dtlID=) made the loans under terms of 11 programs, eight of them (http://www.federalreserve.gov/newsevents/press/monetary/20080914a.htm) created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.
``It's your money; it's not the Fed's money,'' said billionaire Ted Forstmann (http://search.bloomberg.com/search?q=Ted+Forstmann&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), senior partner of Forstmann Little & Co. in New York. ``Of course there should be transparency.''
Treasury, Fed, Obama
Federal Reserve spokeswoman Michelle Smith (http://search.bloomberg.com/search?q=Michelle+Smith&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) declined to comment on the loans or the Bloomberg lawsuit. Treasury spokeswoman Michele Davis (http://search.bloomberg.com/search?q=Michele+Davis&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) didn't respond to a phone call and an e-mail seeking comment.
President-elect Barack Obama (http://search.bloomberg.com/search?q=Barack+Obama&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1)'s economic adviser, Jason Furman (http://search.bloomberg.com/search?q=Jason%0AFurman&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), also didn't respond to an e-mail and a phone call seeking comment from Obama. In a Sept. 22 campaign speech, Obama promised to ``make our government open and transparent so that anyone can ensure that our business is the people's business.''
The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program (http://www.ustreas.gov/press/releases/hp1207.htm), or TARP, bailout plan -- without safeguards put into the TARP legislation by Congress.
Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. The difference includes a $788 billion increase in loans to banks through the Fed and $474 billion in other lending, mostly through the central bank's purchase of Fannie Mae and Freddie Mac bonds.
Sept. 14 Decision
Before Sept. 14, the Fed accepted mostly top-rated government and asset-backed securities as collateral. After that date, the central bank widened standards to accept other kinds of securities, some with lower ratings. The Fed collects interest on all its loans.
The plan to purchase distressed securities through TARP called for buying at the ``lowest price that the secretary (of the Treasury) determines to be consistent with the purposes of this Act,'' according to the Emergency Economic Stabilization Act of 2008, the law that covers TARP (http://www.ustreas.gov/press/releases/hp1207.htm).
The legislation didn't require any specific method for the purchases beyond saying mechanisms such as auctions or reverse auctions should be used ``when appropriate.'' In a reverse auction, bidders offer to sell securities at successively lower prices, helping to ensure that the Fed would pay less. The measure also included a five-member oversight board that includes Paulson and Bernanke.
At a Sept. 23 Senate Banking Committee (http://www.banking.senate.gov/) hearing in Washington, Paulson called for transparency in the purchase of distressed assets under the TARP program.
`We Need Transparency'
``We need oversight,'' Paulson told lawmakers. ``We need protection. We need transparency. I want it. We all want it.''
At a joint House-Senate hearing the next day, Bernanke also stressed the importance of openness in the program. ``Transparency is a big issue,'' he said.
The Fed lent cash and government bonds to banks, which gave the Fed collateral in the form of equities and debt, including subprime and structured securities such as collateralized debt obligations, according to the Fed Web site. The borrowers have included the now-bankrupt Lehman Brothers Holdings Inc. (http://www.bloomberg.com/apps/quote?ticker=LEHMQ%3AUS), Citigroup Inc. and JPMorgan Chase & Co.
Banks oppose any release of information because it might signal weakness and spur short-selling or a run by depositors, said Scott Talbott (http://search.bloomberg.com/search?q=Scott+Talbott&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), senior vice president of government affairs for the Financial Services Roundtable (http://www.fsround.org/), a Washington trade group.
Frank Backs Fed
``You have to balance the need for transparency with protecting the public interest,'' Talbott said. ``Taxpayers have a right to know where their tax dollars are going, but one piece of information standing alone could undermine public confidence in the system.''
The nation's biggest banks, Citigroup, Bank of America Corp., JPMorgan Chase, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley, declined to comment on whether they have borrowed money from the Fed. They received $120 billion in capital from the TARP, which was signed into law Oct. 3.
In an interview Nov. 6, House Financial Services Committee Chairman Barney Frank (http://search.bloomberg.com/search?q=Barney+Frank&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said the Fed's disclosure is sufficient and that the risk the central bank is taking on is appropriate in the current economic climate. Frank said he has discussed the program with Timothy F. Geithner (http://search.bloomberg.com/search?q=Timothy+F.+Geithner&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), president and chief executive officer of the Federal Reserve Bank of New York and a possible candidate to succeed Paulson as Treasury secretary.
``I talk to Geithner and he was pretty sure that they're OK,'' said Frank, a Massachusetts Democrat. ``If the risk is that the Fed takes a little bit of a haircut, well that's regrettable.'' Such losses would be acceptable, he said, if the program helps revive the economy.
`Unclog the Market'
Frank said the Fed shouldn't reveal the assets it holds or how it values them because of ``delicacy with respect to pricing.'' He said such disclosure would ``give people clues to what your pricing is and what they might be able to sell us and what your estimates are.'' He wouldn't say why he thought that information would be problematic.
Revealing how the Fed values collateral could help thaw frozen credit markets, said Ron D'Vari (http://search.bloomberg.com/search?q=Ron+D%26%2339%3BVari&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), chief executive officer of NewOak Capital LLC in New York and the former head of structured finance at BlackRock Inc.
``I'd love to hear the methodology, how the Fed priced the assets,'' D'Vari said. ``That would unclog the market very quickly.''
TARP's $700 billion so far is being used to buy preferred shares in banks to shore up their capital. The program was originally intended to hold banks' troubled assets while markets were frozen.
AIG Lending
The Bloomberg lawsuit argues that 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.''
The Fed has lent at least $81 billion to American International Group Inc. (http://www.bloomberg.com/apps/quote?ticker=AIG%3AUS), the world's largest insurer, so that it can pay obligations to banks. AIG today said it received an expanded government rescue package valued at more than $150 billion.
The central bank is also responsible for losses on a $26.8 billion portfolio guaranteed after Bear Stearns Cos. was bought by JPMorgan.
``As a taxpayer, it is absolutely important that we know how they're lending money and who they're lending it to,'' said Lucy Dalglish (http://search.bloomberg.com/search?q=Lucy+Dalglish&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), executive director of the Arlington, Virginia- based Reporters Committee for Freedom of the Press.
Ratings Cuts
Ultimately, the Fed will have to remove some securities held as collateral from some programs because the central bank's rules call for instruments rated below investment grade to be taken back by the borrower and marked down in value. Losses on those assets could then be written off, partly through the capital recently injected into those banks by the Treasury.
Moody's Investors Service alone has cut its ratings on 926 mortgage-backed securities worth $42 billion to junk from investment grade since Sept. 14, making them ineligible for collateral on some Fed loans.
The Fed's collateral ``absolutely should be made public,'' said Mark Cuban (http://search.bloomberg.com/search?q=Mark+Cuban&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), an activist investor, the owner of the Dallas Mavericks professional basketball team and the creator of the Web site BailoutSleuth.com (http://www.bailoutsleuth.com/), which focuses on the secrecy shrouding the Fed's moves.
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).
To contact the reporters on this story: Mark Pittman (http://search.bloomberg.com/search?q=Mark+Pittman&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in New York at mpittman@bloomberg.net; Bob Ivry (http://search.bloomberg.com/search?q=Bob+Ivry&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in New York at bivry@bloomberg.net; Alison Fitzgerald (http://search.bloomberg.com/search?q=Alison+Fitzgerald&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in Washington at afitzgerald2@bloomberg.net.
Last Updated: November 10, 2008 15:08 EST
http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide

David Guyatt
11-11-2008, 02:06 PM
I never thought I'd say it but... go Bloomberg!

Jan Klimkowski
11-11-2008, 09:26 PM
In the above article, Paulson is quoted as saying:


`We Need Transparency'
``We need oversight,'' Paulson told lawmakers. ``We need protection. We need transparency. I want it. We all want it.''

In the original bailout bill, former Goldman Sachs CEO Paulson wanted to use $700 billion of US taxpayers' money to "purchase" toxic debt, mostly worth a couple of cents to the dollar, from Wall Street banks. Because this was theft - pure and simple looting exchanging Wall Street trash for taxpayer cash - the following clause was included:


Section 8 of the Paulson proposal states: "Decisions by the Secretary (Paulson) pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

In other words, Paulson wanted to grant himself immunity from prosecution in all jurisdictions, forever.

I called this proposal for the disgrace it was at the time, and amazingly it was rejected in a final vote after its shameful & scandalous existence was brought to wider public attention.

None of that changes the fact that Hank Paulson is a lying, thieving, piece of scum who cares not one jot about ordinary people.

Magda Hassan
11-12-2008, 01:05 AM
Mmm... I won't be holding my breath waiting for anyting to come of this but at least it is on the record.



Does any one else think it appropriate/amusing that a shonky Treasury official is called Mr Kashkari?




Subcommittee Demands Testimony from Treasury Official on Use of Bailout Funds; “Serious Questions” for Mr. Kashkari

Submitted by davidswanson on Tue, 2008-11-11 17:37.

Congress (http://www.afterdowningstreet.org/congress)
Wall Street (http://www.afterdowningstreet.org/taxonomy/term/108)

Washington D.C. (November 11, 2008) – The leading Democrat and Republican of a House Oversight Subcommittee insisted on the testimony of a top Treasury official today. Congressman Dennis Kucinich (D-OH) and Congressman Darrell Issa (R-CA) sent a letter to Secretary Paulson insisting that Mr. Neel Kashkari, the Interim Assistant Secretary of the Treasury for Financial Stability, testify before a hearing of the Domestic Policy Subcommittee on Friday, November 14, 2008. Congressman Kucinich is the Chairman of the Domestic Policy Subcommittee and Congressman Issa is the Ranking Minority Member.
“There are serious questions about Treasury Department’s plans to realize the goals of the Emergency Economic Stabilization Act of 2008 that can only be addressed by the official in charge,” Kucinich and Issa wrote in the letter.
“The time has come for the Treasury Department to speak clearly and definitively to Congress and the American people about its plans for the extraordinary sums Congress has authorized,” they added.
The hearing, entitled “Is Treasury Using Bailout Funds to Increase Foreclosure Prevention, as Congress Intended,” will be the Subcommittee’s sixth hearing in the 110th Congress examining the foreclosure crisis and its solutions.
The purpose of this hearing is to assess Treasury’s use of and clarify their intentions for a $700 billion fund, known as the Troubled Assets Relief Program (TARP). Congress established the TARP on October 3, 2008, and provided it with two sequential tranches of $350 billion. One of TARP’s core functions is to prevent future foreclosures through the acquisition of mortgage-related assets, such as whole loans, mortgage-backed securities and other financial products, and the implementation of a plan to stem foreclosures on those loans. In creating TARP, Congress was aware of the efforts of the private mortgage servicing industry to prevent foreclosures, and committed an extraordinary sum of taxpayer funds to expand upon those efforts. In light of public statements by Treasury, and the department’s commitment of more than two-thirds of the first tranche to purposes other than foreclosure prevention, important oversight questions remain.
Mr. Kashkari’s presence at the hearing was originally requested by letter on October 31, 2008. The Subcommittee sent the below letter, after the initial request was denied by Treasury.
The full text of the letter follows:
November 11, 2008
The Honorable Henry M. Paulson, Jr.
Secretary
U. S. Department of Treasury
1500 Pennsylvania Avenue NW
Washington D.C. 20220
Dear Secretary Paulson:
We are writing to insist that Mr. Neel Kashkari, Interim Assistant Secretary of the Treasury for Financial Stability, testify at the Domestic Policy Subcommittee’s hearing on Friday, November 14, 2008. There are serious questions about Treasury Department’s plans to realize the goals of the Emergency Economic Stabilization Act of 2008 that can only be addressed by the official in charge.
As you know, on October 3, 2008, Congress passed the Emergency Economic Stabilization Act (EESA) and thereby created the Troubled Assets Relief Program (TARP) to further two Congressional objectives: the unfreezing of the credit markets and the prevention of foreclosures. Congress authorized two sequential tranches of $350 billion to achieve those goals.
TARP has already committed $250 billion to the purchase of preferred equity in a number of national and regional banks. There have been numerous news reports that the banks have used their TARP-provided equity stakes not for new lending, but for purposes contrary to the intent of Congress in passing EESA, such as the acquisition of other financial institutions, compensating employees and paying bonuses, and paying for the distribution of dividends for shareholders.
In his October 23 testimony before the Senate Banking Committee, Mr. Kashkari spoke only in broad generalizations, and did not provide the Committee with specifics about asset-acquisition or plans to promulgate new rules. As recently as last week, our staff interviewed high ranking TARP officials. Unfortunately, what they heard from Treasury consisted predominantly of generalities and aspirations.
The time has come for the Treasury Department to speak clearly and definitively to Congress and the American people about its plans for the extraordinary sums Congress has authorized. We do not believe that can occur in any other way than to have the testimony and answers of the person appointed by you to head the TARP. For that reason, Mr. Kashkari’s appearance is imperative.
We look forward to your response.
Sincerely,
Dennis J. Kucinich Darrell E. Issa
Chairman Ranking Minority Member
Domestic Policy Subcommittee Domestic Policy Subcommittee
http://www.afterdowningstreet.org/node/37604

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David Guyatt
11-12-2008, 10:31 AM
I wonder if one reason Paulson doesn't want openness is that he is bailing out a number of non US banks and that this would cause widespread unrest if discovered (there may of course be a small number of convergent reasons for keeping this all secret)?

I find it more than interesting that three of the top UK banks that declined to participate in the UK government's equity-stake rescue plan were Barclays, HSBC and Standard & Chartered.

Having the government as an equity partner would, I imagine, mean that the UK government would have legal right of access to inspect the records of any bank that participated in the government rescue package.

Wouldn't that be cosy...

Magda Hassan
11-12-2008, 10:38 AM
Yes. I found that interesting about the British banks too. I think you may be right there. They don't seem to want too much accountability at all.

I've never understood why governments are not on the boards anyway. Enough of this 'Commercial in Confidence' BS