Republicans and Democrats in Congress rarely agree on anything, but forcing the US Federal Reserve to be more transparent is a place where the two sides come together.
A shocking article by Bloomberg demonstrates why it’s more important than ever to shine some sunlight on this murky institution:
“The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.”
The article reports that these actions, which the Fed was forced to disclose through the Freedom of Information Act, may have shielded underlying problems at too-big-to-fail banks by propping up shaky institutions. These moves, in turn, may have prevented Congress from knowing the complete situation as it was crafting a regulatory regime to avoid another 2008-style financial crisis.
” ‘When you see the dollars the banks got, it’s hard to make the case these were successful institutions,’ says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. ‘This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.’ “
We’ll see if lawmakers act on this new information now to do at least two things: force the Fed to disclose what it does and break up each too-big-to-fail bank that exists today, in large part because of the Fed’s secret actions in 2008-2009.