OMG If You Tell People What We Did The World Will End
Bloomberg has sued the Fed to disclose documents describing how the TARP money (and that infused into various affiliated programs) was actually used by the banks that signed up for it. A federal district court has done what Congress could not do: order the Fed to turn this information over under the FOIA. The banks, it turns out, have taken the position that the release of accurate information will cause the spread of rumors that will undermine the capitalist system. Because, you know, in the system right now, BoA is a magic pony that exists due to its superb financial management (of unlimited taxpayer largesse.)
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Oh they mean that if people were to actually learn how sleazy, short sighted, corrupt, greedy and just pain stupid these Bands really are they might lose all faith in them ??? Is that what their saying ??
Well TFB !
C
August 27, 2009 12:45 PM | Reply | Permalink
Word!
Good post Ruta! Keep em comin!
August 27, 2009 12:48 PM | Reply | Permalink
Sorry, I meant Rumpole not Ruta! Please excuse the Alzheimer's moment.
August 27, 2009 12:49 PM | Reply | Permalink
Rumpole,
This is a great find. Do you know if this has this been exposed in any MSM outlet?
Very interesting. Scary.
(Note: B of A is also one who continues to sponsor Beck on FAUX. Might explain why no coverage, at least factual, of this issue on their distorted airwaves!)
Thanks. Please keep updated.
Rec'd.
August 27, 2009 12:48 PM | Reply | Permalink
Just a couple of nits to pick.
1. It's about the Fed discount window, a lending program which is distinct from TARP which involved equity stakes, not lending.
2. People have to stop referencing Zero Hedge. They're not reliable, sadly - at least some of the Tyler Durdens behind 'Tyler Durden' are incompetent/corrupt.
August 27, 2009 12:55 PM | Reply | Permalink
1. It's my understanding that many of the investment banks reorganized as bank holding companies so that they could take advantage of this window. They then asked for (and in some cases received) waivers excusing them from the reserve requirements that "ordinary" banks have to endure. At the time I wrote it, I confess I didn't focus on the distinction, but I suppose that the question will ultimately be if any of these documents shed light on what the banks were doing with the bailout money--something that (?) it would make sense for them to have to disclose to the Fed as a borrower. Don't know the answer.
2. Fair enough. I would note that they seem to have won a first amendment award for journalism along with Barry Ritholz (whose book is great), so they can't be all bad. I just found the blog myself so have no opinion on it other than it's pretty interesting and skeptical of conventional Wall Street wisdom. While Zero Hedge may or may not be reliable, they cited the document and reprinted it. What's your beef with them?
August 27, 2009 2:30 PM | Reply | Permalink
1. Oh, this info should definitely come out. But it has nothing to do with the TARP funds. This is about Fed lending massively to the banks at 0% interest, and the banks trumpeting their ability to make bumper profits all by themselves. Publicizing the fact that Goldman and co are still heavily reliant on government support through the discount window even after returning TARP funds just blows up that banker talking point.
2. Oh, referencing them for putting up the doc is fine. It was a more general point. It's come out that one of them is a financial criminal, and the more I read them the less credible they are. They make basic errors, sometimes trivial, in how the Fed works, and on the nature of HFT, that just makes the whole site dubious. Sad, because they often have really great stuff as well, but everything now has to be taken with a grain of salt. If they each had their own pseudonym, that would be a huge help in separating the wheat from the chaff...
August 27, 2009 2:40 PM | Reply | Permalink
Yves Smith?
August 27, 2009 11:13 PM | Reply | Permalink
Rather Salmon and Jansen. Smith has sadly done more to build up their reputation than anyone...
August 28, 2009 4:52 AM | Reply | Permalink
In this case I side with the banks. The whole thing is built on an elaborate illusion.
Of course, it has always been built on an illusion, but a convenient one, and it only covered a swamp. Now the illusion covers a bottomless, civilization-swallowing pit. As Congressman Whatshisname said on CSPAN that day last fall, Western civilization was about 5 hours away from complete economic collapse. That collapse was only averted by the actions of the Fed.
The conditions of that collapse still exist. We're still on a precarious economic catwalk, suspended between two cliffs, with portions hanging on by a single nail, while pteradactyls swoop through the mist and velociraptors are picking off our companions one by one. At this point, the thinking goes, it's better to pretend we're safe than face up to the reality that we're all gonna die, because the panic of we're all gonna die will assure it will happen, while if they can coax enough of us to be very very still, a few of them will be able to climb off before the whole structure plunges into the abyss.
August 27, 2009 3:27 PM | Reply | Permalink
I have to agree with you. It is possible that the light of day could be made to shine on truth and the bridge could hold. But it is possible it wouldn't. And the rolling economic thunder from the collapse would be like nothing we've experienced before.
Part of this is that while these bankers commited crimes against common decency, for the most part what they did was perfectly legal thanks to deregulation, etc. So this isn't about putting people behind bars. So it is a question each person must ask his or herself, is the truth in this case (a truth of which we know the basic outline of, just not the gory details) worth the risk.
August 27, 2009 4:47 PM | Reply | Permalink
The problem is, in my opinion, they're doing nothing to shore things up. They managed not to plunge into the abyss last time, but rather than quietly begin building a more stable structure beneath the existing illusion, (to continue the fantasy fiction metaphors) they've decided see if they can stuff a few more gems in their pockets before it falls.
August 28, 2009 9:39 AM | Reply | Permalink
"..the release of accurate information will cause the spread of rumors that will undermine the capitalist system."
I picture a cadre of Attorneys in $2000 suits making this argument, then turning and covering their mouths so the judge doesn't hear the giggling they can hardly suppress. The FOIA request will actually cause the spread of information that will undermine the rumors the capitalists have spread. Good post, Rumpole. Maybe this will lead to more of that promised transparency eventually.
August 27, 2009 6:02 PM | Reply | Permalink
Plus the decision will be appealed to a higher court; oh, yawn, again...
Nice of you to post it, though.
August 27, 2009 9:57 PM | Reply | Permalink
It's a trying task but giving the Fed the benefit of the doubt, here's a little history behind the Fed's policy from Paul Kasriel.
August 27, 2009 10:12 PM | Reply | Permalink
That's interesting background, thanks for sharing. What are your thoughts? I would think you would be in favor of full disclosure and let the chips fall where they will.
If we get another full blown meltdown maybe we will actually get some real political change that start to address our underlying structural problems. Beats looking the other way while the fed prints money for rich pricks.
August 27, 2009 11:51 PM | Reply | Permalink
Agreed -- and the Federal Reserve Transparency Act is not enough. We have to get rid of this bankster beholden parasite lock, stock and barrel.
Change We Can Believe In: Barack Obama's Plan to Renew America's Promise
I am so depressed!
August 28, 2009 11:16 AM | Reply | Permalink
Me too.
August 28, 2009 11:50 AM | Reply | Permalink
It is stupid beyond measure to have a very small number of national banks handle upwards of 80% all U.S. commerce and not keep them under a very tight and transparent rein. Doing so is to invite certain marketplace abuse and failure. Common sense tells us the top players in this arena are addicted to power and a lifestyle unprecedented in our history. Why nobody acknowledges this is beyond me. Just look at the hutzpah they have shown since everything went to hell and you know this to be the case. And our regulators are of the same stripe. You just can't have a collective failure like has occurred and not take some serious action. Not if you want to prevent it's reoccurrence. Stupid.
August 28, 2009 11:40 AM | Reply | Permalink
While I think the tone of this post was a bit overzealous, I agree that the TARP money ought to be publicly accounted for.
August 28, 2009 11:58 AM | Reply | Permalink
One of the reader comments on the ZH article summed it up best: "We're borrowing from the Fed discount window because we're insolvent, but if you disclose that we're insolvent, people might start spreading rumors that we're insolvent."
Revealing who borrowed and how much IS important information for Americans to know, PRECISELY because it will call out the misinformation (read: lies) that GS, Citi and all the other shysters have been peddling of late. That they've repaid their TARP funds and are making record profits and everything is fine. (I'm reminded of Officer Barbrady on South Park: "Nothing to see here, people. Move along!")
Meanwhile, they pay themselves insane bonuses and take asinine gambles with our money, knowing that Ben & Timmy won't let anything bad happen to their peeps.
I think we need to remind them...IT'S OUR FUCKING MONEY!
August 28, 2009 12:12 PM | Reply | Permalink
If the Obama administration and Congress were taking active measures to dismantle the conditions that led to this, I'd be perfectly happy to let them maintain the illusion of solvency while they construct a new system.
What concerns me is, like you say, they're not doing anything to restructure the banking system. It's been all "move along" while the aliens keep turning cows inside-out. The first step is to break up the banks that are too big to fail, then put structures in place to prevent any bank from growing that large again. It's a national security issue, in my opinion, and to hell with capitalism in this instance. The free market is not a suicide pact.
Sounds complicated, but I think it could be accomplished with a fairly simple change in FDIC regulations. Just make it a rule that the FDIC will only insure $50 billion in deposits with any single banking corporatation and Citi, BoA, Wells Fargo, etc., will have no choice but to break themselves up. BoA, for instance, would have to subdivide into something like 19 different banks. If BoA went belly-up tomorrow, the FDIC liabilities alone would be larger than all the TARP funds put together. How Congress and the president can allow that situation to continue, when a simple rules change would make it all go away, I just don't know.
Oh, yes I do. Because the banks would scream bloody murder.
August 28, 2009 5:41 PM | Reply | Permalink