Bernanke: Fed won’t give details on emergency bank loans
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Federal Reserve Chairman Ben S. Bernanke told Congress today that the central bank won’t publicly disclose the details of the $2 trillion in emergency loans it has made to financial institutions.
Bloomberg News on Nov. 7 sued the Fed for the information, including the names of the banks that have tapped the Fed’s credit facilities.
Bloomberg’s view is that the financial help the Fed is providing is far greater than the separate, $700 billion that Congress authorized the Treasury to spend on a financial-system bailout -- yet the Fed has no obligation to tell the public or Congress what it’s doing with its funds.
Forget about it, Bernanke told the House Financial Services Committee.
From Bloomberg:
‘Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,’ Bernanke said. ‘We think that’s counterproductive.’ ‘First, the success of this depends on banks being willing to come and borrow when they need short-term cash,’ Bernanke said in response to questioning from Rep. Spencer Bachus (R-Ala.). ‘There is a concern that if the name is put in the newspaper that such-and-such bank came to the Fed to borrow overnight for a perfectly good reason, that others might begin to worry is this bank creditworthy and that might create a stigma, a problem, and might cause banks to be unwilling to borrow, and that would be counterproductive.’
One of Bloomberg’s key concerns is the quality of the collateral the Fed is taking from banks in return for loans, and whether that collateral poses a high risk to the Fed and, therefore, to taxpayers.
Before Sept. 14, the news organization notes, ‘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.’
From the hearing story today:
Bernanke said the central bank would not lose money on its lending. ‘We take collateral, we haircut it, it is a short-term loan, it is very safe, we have never lost a penny in these various lending programs,’ he said.
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.’
Guess we’ll have to wait to see the lists as an appendix to Bernanke’s memoirs.