General15 Nov 2008 05:55 pm

When the Fed went before congress to ask for hundreds of billions of dollars to help our troubled economy they got the money under specific conditions. The major concern of congress was that the Fed use the money for specific purposes and gave full disclosure of how the money was being used. In fact congress gave deadlines for this information to be reported.

Well, those dates have passed and the Fed has refused to tell congress what they have done with the money. No one knows who they’ve given money to, how much and for what specific purposes. To my knowledge congress has taken no action on this refusal to comply.

It would seem to me that the Fed’s act of defiance breaks at least one or two laws. First they lied to congress when they promised to give full disclosure as a condition of getting the stimulus package passed. And second they are in subordination by directly refusing to comply with congresses directive to keep them informed.

If a citizen were to refuse to live up to their promise under oath to congress I would imagine they would be sent to jail until they complied. How many times has a journalist been threatened with jail if they failed to disclose their sources? And these journalists never promised to provide full disclosure.

The avowed reason for the stimulus/bailout was to provide liquidity and restore confidence in the financial system. The concern over the subprime and credit fiasco has led to a concern over the health of banks and other financial institutions. Banks are afraid to do business with each other out of fear of each others finacial stability and ability to honor their obligations. The lack of Fed disclosure is keeping all interested parties in the dark. Investors, banks and financial institutions are being prevented from knowing who is in trouble, what assistance they are receiving and how the Fed’s actions are influencing the financial crisis and credit problem.

This lack of disclosure is only intensifying the culture of fear and mistrust which is freezing our financial system. Yet, I guess congress has no problem with this. I guess everyone is comfortable heading towards a global depression, and would consider honesty too dangerous of a precedent to set.

Some habits are tough to break. Yet, as I’ve mentioned in a number of my recent posts, the actions of the government and the Fed appear to be intentionally ushering in a deflationary depression. Of course, their words will say otherwise, but actions speak louder than words. And verbal deception is a vital tool in business and politics.

Jim Guido

3 Responses to “Fed Accountability?”

  1. […] Read the original post […]

  2. on 16 Nov 2008 at 10:33 am G. Scott

    “This lack of disclosure is only intensifying the culture of fear and mistrust which is freezing our financial system.”

    Their justification almost has the ring of truth: “We don’t want to disclose this information because it will show which banks are weak, and that will cause runs on those banks.”

  3. on 16 Nov 2008 at 1:56 pm Guido

    The sad thing is it really isn’t a choice between keeping one’s word and causing a run on the banks, but that’s how the Fed wants us to feel.
    I know one is supposed to yell fire in a crowded theater, but one still needs to inform people that there is a fire. For more people will likely die if they are not told that there is a fire or where the fire is than by being told that a fire exists.
    Also the Fed should have brought up the concern rather than accept the bail out under the conditions set forth by congress.

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