Bernanke’s Fed: The Only Decent Thing to Do Is to Deceive Us
With all the positive news about the financial sector coming out left and right, Bloomberg News asked the Federal Reserve which banks participated in an “emergency lending program” and how much money they received. The Federal Reserve gave Bloomberg News the same response I used to sometimes get when I was in 5th grade: None of your business… it’s a secret.
Bloomberg News, being sticklers for The Freedom of Information Act, went to the U.S. District Court in Manhattan to ask Chief Justice Loretta Preska what the court’s opinion might be, and last week she said the court thought it actually was very much “our business”. She ordered the Fed to release the information to Bloomberg News so they could share with us which banks were having financial emergencies and how big those emergencies were.
So, the Federal Reserve said: “Okay, we’re sorry,” and released the information. Oh, come on… you know that’s not how things work in this country today. Not a chance.
In response to the court’s order, U.S. Federal Reserve officials asked the judge not to enforce the order because they said that if they released the information, the banks that participated and the entire economy might, in a phrase, come apart at the seams.
Here’s the statement the Fed issued to the press:
“Immediate release of these documents will cause irreparable harm to these institutions and to the board’s ability to effectively manage the current, and any future, financial crisis.”
Now, if you’re thinking: “That’s weird… I would have thought that point would have come up in court during the lawsuit.” Well, Justice Preska thought that too. She stated that the Federal Reserve had failed to show how revealing the names of the banks and the amounts of money they each received would result in “imminent competitive harm”.
So, the Federal Reserve said: “Okay, we’re sorry,” and released the information. What? It could happen. It didn’t, of course, but it could… maybe… someday. In real life, the Fed is preparing an appeal.
Then, in a surprise move, an organization called The Clearing House LLC, an agency that represents banks, including Bank of America, Citigroup, HSBC, Wells Fargo and JPMorgan Chase, filed a motion in support of the Federal Reserve’s position. Frankly, I was shocked to see the banks supporting the position taken by the banks.
The Clearing House LLC said that if the information was released, there might be runs on deposits and trading partners might demand additional collateral on outstanding loans, which is another way of saying that if people knew the truth, they might want to put their money in a bank that’s not at risk of going under.
Now, I’m no expert, but I think The Clearing House LLC is probably right about that. Besides, it’s more fun for people not to know. Kind of like something Las Vegas casinos might come up with… put your money in any one of the 1,000 banks… then we spin the wheel and which ever one comes up, the people that chose that one lose everything! Yay! Heck, it sounds fun… I’d have to go pay-per-view on something like that.
Or how about this one… there’s a bomb set to go off in 100 of these 1,000 office buildings… but we’re not going to tell you which 100. Tune in tomorrow when we’ll see which ten will explode! I’ve even got a name for the show… we could call it: All Men Are Cremated Equal. What do you think? I think it’s got legs…
So, that’s it for now. I guess the only question that remains would have to be: Which monkey do you want to be? The one covering his eyes, ears, or mouth?
By the way, I do have an answer to all of this and I’ll give it to you in four words: Royal Bank of Canada. I’m not kidding, here’s the link… and you’re welcome, don’t you know.