"The Federal Reserve is not God. They must disclose." — ALG President Bill Wilson.
August 24th, 2010, Fairfax, VA— Americans for Limited Government President Bill Wilson today demanded the Federal Reserve comply with a court order to disclose the recipients of some $2 trillion of loans it made at the height of the financial crisis requested by Bloomberg News in a Freedom of Information Act (FOIA) request.
"The American people have a right to know just what has gone wrong with the nation's monetary policy, how it contributed to the financial crisis, and what the true extent of the Fed's relationship with financial institutions, foreign banks, and foreign central banks really is," Wilson said, adding that "Complying with these multiple court rulings is the first step in that direction to financial transparency of the nation's balance sheets."
The central bank is still refusing to comply with Bloomberg's FOIA request, despite a U.S. Court of Appeals decision not to hear their appeal, according to Bloomberg News. The Fed is planning to appeal to the Supreme Court.
"The shroud of secrecy at the Federal Reserve needs to come to an end. They have lost their court case, and now even in the Dodd-Frank financial takeover bill, there are provisions that call for the Federal Reserve to produce the information Bloomberg requested under the Freedom of Information Act," Wilson declared, pointing to Section 1109(c) of HR 4173.
The provision provides for the Fed to publish on its website by December 1st all "loans and financial assistance" it provided from December 7th, 2007 through July 21st, 2010 provided under the authority of Section 13(3) of the Federal Reserve Act, including the Term Asset-Backed Securities Loan Facility and the Primary Dealer Credit Facility. Under the new law, it will have to disclose:
(1) the identity of each business, individual, entity, or foreign central bank to which the Board of Governors or a Federal reserve bank has provided such assistance;
(2) the type of financial assistance provided to that business, individual, entity, or foreign central bank;
(3) the value or amount of that financial assistance;
(4) the date on which the financial assistance was provided;
(5) the specific terms of any repayment expected, including the repayment time period, interest charges, collateral, limitations on executive compensation or dividends, and other material terms; and
(6) the specific rationale for each such facility or program.
Wilson noted that the provision in the Dodd-Frank bill was the result of a compromise between the amendment's sponsor, Senator Bernie Sanders and Senator Chris Dodd.
"One would have thought that Section 1109(c) of the Dodd-Frank bill would have rendered Bloomberg's case moot, however, it appears the Fed is still intent on preventing disclosure of its role in bailing out the financial sector," Wilson said.
Wilson called it "hardly surprising" that "despite multiple court rulings demanding that it comply with Bloomberg's FOIA request, and even changes to the law of the land to force this disclosure, that the Fed still refuses to comply. These are not military secrets, they are well within the scope of FOIA, and now the Dodd-Frank bill, too," Wilson said.
"The Federal Reserve is not God. They must disclose," Wilson posted on Twitter upon learning about the most recent court decision.
According to Bloomberg News, the Federal Reserve had committed over $7.76 trillion for the financial bailout. However, it is unclear who received $2 trillion loans from the Federal Reserve, or who will receive the remainder of the committed funds.
Wilsons said that the Federal Reserve was "one of the principal actors" that caused the financial crisis: "By keeping interest rates too low for too long, the Fed accommodated the inflation of the housing bubble throughout the 1990's and 2000's by pumping easy money into the system."
Wilson cited research by Stanford economist John Taylor who in a recent Wall Street Journal column wrote, "the Fed's target for the federal-funds interest rate was well below what the Taylor rule would call for in 2002-2005. By this measure the interest rate was too low for too long, reducing borrowing costs and accelerating the housing boom. The deviation from the Taylor rule, which had characterized good monetary policy during the previous two decades, was the largest since the turbulent 1970s."
Wilson said that as the capital the Fed provided through the banking system helped to create the housing bubble and "disproportionately contributed the rise of the nation's money supply." In 1990, outstanding mortgage debt held was $3.805 trillion. By the end of 2007, total mortgage holdings had risen to $14.568 trillion, a monumental 282 percent jump of $10.763 trillion in new mortgages. During that same period, according to the True Money Supply index from the Ludwig Von Mises Institute, the money supply rose from about $1.787 trillion at the end of 1990 to about $5.268 trillion by the end of 2007, an 195 percent increase of $3.481 trillion.
In addition, Wilson said the Federal Reserve's role in providing loans and other financial assistance are "very unclear." According to Bloomberg, "The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return." The Fed has argued it is actually allowed to withhold "internal" memos as well as commercial and trade secrets information. Bloomberg, on the other hand, has actively filed a Freedom of Information Act (FOIA) request, demanding the information.
Thus far, the Fed's Board of Governors has refused to comply with Bloomberg's FOIA requests, despite multiple court rulings in Bloomberg's favor. The Fed's regional Reserve Banks have argued that they are private institutions beyond the reach of the Freedom of Information Act.
The Southern District Court of New York has ordered that the Federal Reserve Board of Governors comply with Bloomberg News' Freedom of Information Act (FOIA) request to produce the details of some $2 trillion in emergency loans that were made. This includes who received the $2 trillion of loans, the terms under which they were received, and what collateral was taken by the Reserve branches in exchange for the loans.
In answering questions from Congressman Alan Grayson (D-FL) last year, Fed Inspector General Elizabeth Coleman testified she could not account for "$1 trillion-plus that the Fed extended and put on its balance sheet since last September…"
An email to Bloomberg by Coleman's office also revealed that "By law, we are the Office of Inspector General for the Board of Governors only… Consistent with our authority, we cannot conduct a direct audit of Reserve Bank operations."
Wilson concluded, "The Federal Reserve must comply with the terms of the Freedom of Information Act, the Dodd-Frank bill, and be held answerable for its actions to bail out financial institutions. They must be held to account."