Dear Friend and Reader,
DO YA’LL REMEMBER those images from the early days of the glorious Iraqi liberation? You know the ones where Iraqis were seen walking into their banks and grabbing anything they could? Or the stories of Saddam Jr. pulling up to the treasury with three tractor trailers to haul off 900 million dollars in tidy stacks of 100 dollar bills?
Seems as if the Bush Administration and their friends have taken a page from the Hussein family playbook.
While we all wait to see how the 700 billion dollar bailout package will trickle down to our pocketbooks, the Federal Reserve Bank has been quietly cutting deals to the tune of nearly two trillion dollars with banking groups like Citigroup and Goldman Sachs — twice the size of the better known bailout deal. Who else got this federal money, and what collateral was provided for those loans is what Bloomberg News wants to know.
According to Bloomberg News, the Federal Treasury has been issuing emergency loans to American banks long before Wall Street and AIG bellied up to the cash bar. Since May of this year Bloomberg has sought information about these loans, but the government has disclosed few details of the loans. Until now, the media has given little attention to the Reserve plan, but that should soon change. Reporters are beginning to ask questions about the supposed transparency of the better known bailout, but the opacity of those answers won’t remotely compare to the wall of secrecy they’ll encounter when they begin to ask questions about the larger Reserve handout.
The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.
The Federal Reserve, meanwhile, has for months pleaded “too busy to stop now!” when Bloomberg requested detailed disclosure of the loans. Now the Fed says it’s none of Bloomberg’s business. Or rather, that the documents kept at the Federal Reserve Bank in New York aren’t subject to the Freedom of Information Act.
Bloomberg disagrees, and this week filed suit to get that information. And it’s not just Bloomberg that wants that information. Biztimes Daily quotes others in the financial community:
‘The collateral is not being adequately disclosed, and that’s a big problem,’ Dan Fuss, vice chairman of Boston-based Loomis Sayles & Co., told Bloomberg. ‘In a liquid market, this wouldn’t matter, but we’re not. The market is very nervous and very thin.’
‘It’s your money; it’s not the Fed’s money,’ billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York, told Bloomberg. ‘Of course there should be transparency.’
According to The Small Business Times, eight of the eleven programs loaning these funds were created in the last fifteen months.
Bloomberg’s pursuit of this story since last May and the recent development of the loan programs suggests that many more people in the financial community knew the economy was about to take a seriously negative turn than recent reports would have us believe. Perhaps they didn’t know when the earthquake would hit, but Citigroup and others must have been feeling the tremors for at least a year now.
What remains to be known is who is getting all this money. The feds argue it’s very sensitive information, but the skeptical (not to mention the paranoid) among us can only believe the real sensitivity at stake here is constitutional. Do we have a right to know who’s getting our tax money or not? And to what lengths will the outgoing administration hide who’s getting our compulsory public tithe?
The Aleph Blog suggests the following reasons for hiding information about the transactions:
- The Fed is breaking its own rules, and lending on collateral that it publicly said that it wouldn’t lend against.
- They are playing favorites with institutions, and don’t want that to be revealed.
- The assets in question are technically in compliance with the rules of the Fed, but are worth far less than the amount loaned against them.
- Certain banks would be embarrassed by revealing what they own.
- It’s just a power game, and the Fed thinks it is above the law, particularly during a crisis (that it helped to cause).
Bloomberg’s suit against the Federal Reserve should test these possibilities, pointedly. Now to see if our judicial system will side with the Reserve Bank or toss this one back on its benumbed citizens…
Suit filed as: Bloomberg LP v. Federal Reserve, U.S. District Court, Southern District of New York (Manhattan)
In related economic news:
Paulson “shifting focus” of bailout money. (nytimes.com)
GM asks for a bailout. (nytimes.com).
The government gives AIG $40 billion more (npr.org).
Allen Greenspan‘s deathbed admission (npr.org).
Yours & truly,
Shanna Philipson
“On a lighter note, from your previous response I thought Richistan was a city in China. I’m glad it isn’t. I would be spending my time reviewing bank financial statements. And that is frustrating because they don’t give enough detail.”
Lol. First time I laughed all day, thank you very much :).
Love the Virgos, writers all of them. I had a Virgo project partner during my last of three adventures at graduate school. She wiped the floor with me, no joke. She wrote seventeen clean elegant pages to my two with ketchup. She had like nineteen jobs and still volunteered to do the Powerpoints. It was like going to school with an undiscovered superspecies.
~j
No, I don’t do that when an abstraction is being talked at me. I am naive enough to try to find the logic in it. It’s some kind of Virgo brain distortion that I justify as curiosity. And we all know what that does to the cat. Its head explodes. I am getting better at not analyzing, but it is a tough addiciton to break. And heck it’s what I was paid for in the workplace. Wonder what that place looks like now. I think I’ll table that for now.
I feel this responsibility partly because the politicians always call me “my fellow Americans” or worse yet “my friends”. Aargh, like I am one of him. And I live here in the same country so I am responsible for what he does. Guilt by association.
On a lighter note, from your previous response I thought Richistan was a city in China. I’m glad it isn’t. I would be spending my time reviewing bank financial statements. And that is frustrating because they don’t give enough detail.
PS Topsoil erosion bad thing in my neighborhood, carries manure to streams. Farmers have got a ways to go yet too. Did I mention riparian buffers, another issue. New land sales here are required to maintain a 100 foot buffer along all waterways. A good thing.
” A community well planned I believe empowers its citizens. But then again we are too busy for that. We have to race to our place of employment and be miserable for most of the day so we can come home and complain about our neighbors.
There are a few good signs. The powers that be may be uncomfortable with my presence at those meetings but I have had fairly good fellow citizen input outside the meetings. They are not standing up yet but they are voicing suppport. I feel like the local Nader. We have two local papers, one privately owned (how novel is that in Gannett land). A local farmer close to the village opened up a community garden. And we have a farmer’s market at the local grocery store. And I am not alone at those meetings. Another walked in a few months ago. ”
:). Oh, a woman after my own heart. How do you do, Ms Victoria’s Secret?
I’m happy for an American regime change because I have high hopes it might reduce the rate at which my tax dollar will be spent on killing people I never met.
But I’m still an anarchist. To me an economy is about what nourishes a group of human beings and how they thrive through energy exchange. Big power, big economies, big governments are forever trying to freak us out over things we can barely fathom — not because they’re unfathomable but because they’re full of lies. Do you do this? You’re listening to someone frame some reality for you like “collateral damage” and you kind of evacuate from the scene? Eyes glaze over. Oh, I see, this is bullshit. Carry on, I see where you’re going with this.
We’re the currency and the coin of the realm, all of us. As far as I’m concerned enjoying the hunk of land and being part of the geography one occupies is the only answer. *The economy*abstraction as it’s used against the people is one of those things that can only hurt you if you really believe.
Um. Topsoil erosion might be real though.
~j
I have heard inklings of this once before. But this time I will look further into the two secrets.
What the hell drives this game?
I have a few dollars to lose, yet. Sure am glad I cashed in my retirement funds three years ago, though.
The collapse would hopefully slow down the development around me and leave more resources in tact. You know the town and village gov wants to keep propping up the tax base. This has proved to be a losing battle considering the inadequate infrastructure. All it is really doing is raising everyone’s taxes and increasing people whining about their neighbors (bedroom community: work out there, make money out there, spend money out there, come home and turn on the tube and complain about the neighbor’s imperfections).
My platform, much to the town board and their friend’s dismay, is to plan with the land. Don’t mow down trees and build in the woods: build next to the woods and grow more trees. Preserve our local food source, farms are being turned into subdivisions. What kind of food supply do we need to support the community. And by all means keep the local feed mill private or community owned. Don’t load up the land near floodplains (which is where I live) with development: utilize the natural storm water management system. And since the village has its own well: don’t channel the water out of here, let it sit in the floodplain and feed the acquifer. And if the money people can afford to build homes worth hundreds of thousands of dollars, they sure can afford to build them energy efficient. What’s with all these peaks and points on houses (my brother installs rain gutters and put 43 corner pieces on a house). And those noxious weeds they want us to obliterate, those are a high energy greens source. Grass is only as useful as the grain it produces.
A community well planned I believe empowers its citizens. But then again we are too busy for that. We have to race to our place of employment and be miserable for most of the day so we can come home and complain about our neighbors.
There are a few good signs. The powers that be may be uncomfortable with my presence at those meetings but I have had fairly good fellow citizen input outside the meetings. They are not standing up yet but they are voicing suppport. I feel like the local Nader. We have two local papers, one privately owned (how novel is that in Gannett land). A local farmer close to the village opened up a community garden. And we have a farmer’s market at the local grocery store. And I am not alone at those meetings. Another walked in a few months ago.
And the powers won’t admit it, but they are getting it. Can they say no to the $$$? That’s a rough one.
I want to close my door to it all and enjoy the pleasures my little hunk of land provides me and just trade with those whose resources I can utilize. It’s a great reality. But then again there may come a time when I am in the way and given the boot so they can develop in the name of progress. There’s that fear thing again. So I guess I just relish what I am experiencing now.
And that is Victoria’s secret.
PS I have no immediate plans to start manufacturing money. Kind of screws everything up, doesn’t it? Comparative value and all that. Onto China and the SAIB.
Hi Victoria:
I think there are two big secrets. Secret number one is named China Development Bank. Ancient Chinese Secret. Ha ha.
Secret number two is named SAIB.
The first thing I thought when I saw the photo on this post was…when did money become an acceptable weapon? Money used to be a secret weapon used in power games with family members or people you were fucking. It looked a lot different on a larger scale when the citizens of Richistan started trying to outrich each other in these ludicrous, truly economy damaging ways. Now..you can spend another country out of existence, you can oppress populations, you can withhold, starve out and siege and it’s all sort of expected.
I really wonder how apocalyptic the “collapse of the financial system” would be for you and me. It would detonate Richistan. But what about us? If we somehow fashioned a peaceful, prosperous local economy and started printing our own money how fast would the tanks roll in?
~j
Okay, my big confession: I worked in accounting and finance for the last 15 years of my employment days. I am a temporary, contract type worker. I went hostage to two companies for a short stint at the end. What is coming down now in the economy is why I got out. Corruption and misinformation.
Anyway, before securing a loan, a business has to present financial documentation to the lender. At the very least, a profit and loss statement, a balance sheet, and a cash flow statement. The lender needs to know what the loan is being used for and how the business intends to pay the loan back. I have had to supply the financial reports as often as monthly to the lender, to ensure them that the company I represent is on track. These things can be fudged, which I refused to do, which on more than one occasion caused much conflict with the small business owners.
The short of it is: if the taxpayer is the lender, shouldn’t this information be available to us? How can we lend money to these businesses in “good faith?” We don’t even know our return on these loans.
Something else is afoot. I have some suspicions and they are not necessarily bad. They have to do with the bailout of certain insurance companies and the future of health care. They have to do with the bailout of certain banks who can then buy out the smaller banks as they go down. France is talking about a national bank. It would be a way to provide higher interest on savings, by being separate from banks that lend at low rates for consumer stimulated economy. I hope it would not lead to privatization of social security through the governmentization of banks. Is centralization where we are headed? And if so, we need to demand information and not take no for an answer. And please oh please I do not want an imbedded chip.
It could be scary. It could be business as usual. It could be fine. It could screw us all over. But hey, if they are just loans, give us the friggin information.
Supposedly the US government financial reports are available on line. I guess maybe it is time we look at those and ask questions. Find yourself an auditor pal, it’s what they do, it’s their duty to their country, right?