Taxpayers have a right to know where their money has gone.
Statesman | Nov 14, 2008
The $700 billion bailout approved by Congress for troubled banks and financial institutions was worrisome enough for Americans. Turns out that only scratched the surface of what the Federal Reserve and U.S. Treasury have done with taxpayer money.
The Federal Reserve has loaned several times the bailout amount — nearly $2 trillion — in taxpayer-funded loans to financial institutions with little oversight and no transparency. The Fed has refused to identify which banks received those loans or what was used as collateral.
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson promised transparency when they asked Congress for the bailout billions. That hasn’t happened. Bloomberg News, which sought the identity of the loan recipients under the federal Freedom of Information Act, was turned down and has sued to get the information.
This, remember, is your money the Fed is handing out. That mind-boggling $2 trillion belongs to the U.S. taxpayers, who have every right to know who is getting the money and the basis for the loans.
U.S. Sen. John Cornyn, the Texas Republican re-elected this month, said in a statement Wednesday that the Fed “has refused to submit to even the most modest level of transparency regarding its actions. This should trouble taxpayers and policy makers alike. It certainly troubles me.”
Cornyn said he and other members of Congress demanded transparency before approving the bailout package. “At a time when American taxpayers are being asked to provide unprecedented loans to get our economy back on track, they deserve to know how and where their money is being used,” he said.
Pouring salt on bleeding wounds, the banks still haven’t loosened credit for consumers despite the trillions in loans and bailout money. Consumer lending remains locked down, and the biggest financial institutions, including Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, Morgan Stanley and Goldman Sachs aren’t saying whether they borrowed money from the Fed.
So where is our money going? We have a right to know, but the Federal Reserve and the Treasury aren’t saying. In fact, they’re not responding at all. So far, neither are representatives for President-elect Barack Obama.
A trade group executive told Bloomberg that the banks getting the loans oppose any disclosure because it might signal weakness and spark a run on deposits. Information, he said, could undermine public confidence in the banking system. Another dodge is that the Federal Reserve shouldn’t say what assets it has or what it paid for them because that would set a precedent for pricing troubled assets.
Sorry, but that doesn’t fly when the Fed is playing with public money. Taxpayers ought to know what is being bought with their tax dollars and at what price. In fact, truth in pricing might be just what is needed to unclog the market for consumer lending.
It was a lack of oversight, openness and transparency that helped get the country into this financial mess in the first place. The last thing we need is more of the same.
The Federal Reserve should follow the law and disclose how much it is lending, to whom and what it has accepted as collateral.