The FED Dances as Rome Burns

In a 47-page judgement, U.S. District Judge Lorena Preska recently ruled that the Federal Reserve, America's quasi-private central bank, must reply to Bloomberg News's request under the Freedom of Information Act (FOIA) by August 31st.

The senior legal counsel for the FED, Ms. Yvonne Mizusawa, claims that the Fed and U.S. banks would suffer irreparable harm if details of the loan programs were made public.  The claim was initially filed by Bloomberg last year during the public outcry following October's Banker Bailout.  So far the names of the recipients of over $2 Trillion USD in off-balance sheet transactions are secret.

Clearing House Association LLC, an industry-owned group in New York that processes payments between banks, filed a declaration that accompanied the request for a stay.  Per Bloomberg, Norman Nelson, VP and general counsel for the group, said, “Our members have accessed the discount window with the understanding that the Fed will not disclose information about their borrowing, especially their identity.”  The group consists of the following banks: ABN Amro Holding NV, Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase Inc., UBS AG, U.S. Bancorp and Wells Fargo & Co.

The FED has the authority to create new money by writing a check on itself, a power that has been described as creating money "out of thin air."  More details can be learned from this mini-series, "Fractional Reserve Banking in Pictures PART 1/2" and "Yes, Virginia, There Are No Reserve Requirements PART 2/2."  

My comments are simply that the FED may be correct in its assessment of the damage the information's release may cause, but by no means should this be used as a sanction to hide from the public.  Readers of this column are very familiar with my views on the American banking system, as can be read in "The FDIC is Bankrupt" and "FDIC: We Aren't Bankrupt and Everything is A-OK."    This is shaping up to be a very important event and may affect your personal financial future.

August 27, 2009 by Jake Towne