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Court orders Fed to release bailout documents





deanhills
Awesome news! We may finally be able to have a look at the Fed's bailout funding. Hopefully it will be soon, as the timing could not have been any better. I cannot understand why it could not have been available from the very beginning. What is so secret about it? If the people approved 1.2-trillion in funds they should have the right for accountability in the spending of it. There should have been a Public Website available, showing exactly how the funds would have been apportioned in a budget, how they would have been spent, and what the results of the spending would have been. That is how I view "transparent" accounting. I would also like to have seen the exact rationale behind the choices of which corporations to bail out and which ones allowed to fail. I wonder whether we will ever know how they made those decisions.
Quote:
The Second Circuit Court of Appeals on Friday ordered the Fed to release details of programs it adopted starting in late 2007 to shore up the financial system and forestall a complete meltdown of global financial markets.

Bloomberg LP, the parent of Bloomberg News, and News Corp's Fox News Network sought details of the central bank's actions under the federal Freedom of Information Act, or FOIA, which requires government agencies to make documents public.

The Fed argued against disclosure, citing an exemption that it said lets federal agencies keep secret various trade secrets and commercial or financial information.

It also said allowing disclosure of participants in the programs and the collateral they posted could cause "competitive and reputational harm," perhaps triggering bank runs, and impede the central bank's ability "to effectively manage the current, and any future, financial crisis."

Reuters 19-Mar-10

I also notice that Senate Banking Committee Chairman Chris Dodd is asking for an investigation in how Lehman Brothers came to fail, specifically following a 2,200 page report showing that auditors may have used Rule 105 to create the appearance of debt that has been reduced (instead they shifted it to Lehman Bros in London):
Quote:
The report criticizes Lehman's use of an accounting trick called "Repo 105" to make its books look better.

Dodd released a draft bill on Monday aimed at preventing future Wall Street bailouts. The rule would create a new consumer regulator housed inside the Federal Reserve to ensure consumers get a fair shake with mortgages and credit cards. It would also trim the ranks of federal banking regulators and clarify the duties of remaining agencies.

In a speech on Monday, Senator Ted Kaufman, D-Del., also called on President Obama to initiate a criminal and civil investigation of Lehman Brothers.

"It is high time that we return the rule of law to Wall Street, which has been seriously eroded by the deregulatory mind set that captured our regulatory agencies over the past 30 years," he said.

He called for an investigation not only of Lehman executives and its board of directors, but also its accounting firm Ernst & Young and foreign banks involved in the "Repo 105" transactions.

Yahoo!Finance 19-Mar-10
SonLight
Some secrecy is necessary when taking actions that directly affect business transactions. Notifying the world that "Hey, we're pumping extra money into bank A because if we didn't it would fail and the FDIC would lose money" would probably insure the failure of that bank, even if the assets provided to them were sufficient for it to recover and prosper.

That's __one__ of the reasons why people are so nervous about having government take a direct stake in a business, even if only temporarily. Our government needs to operate in the open with public knowledge, or corruption will eventually predominate over decisions that are made in the interest of the country as a whole.

When secrecy is necessary, it should not be permanent. I suspect most of the details about what was done in 2007 can now be safely released, but the government should be able to have the need for continued secrecy reviewed by the court in cases where public knowledge of specific asset transfers could still be a major hazard to the health of the companies involved.
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