Federal Reserve Says Disclosing Emergency Bailout Loans Will Hurt Banks – Response

August 28, 2009 by · Leave a Comment
Filed under: Opinion 

Well here is the first shot back after the New York District judge ruled against the Fed in the FOIA lawsuit brought against them from Bloomberg LP.   I am just going to take a little time to address some of the quotes in this article to show how the English language can be distorted to get emotional responses that are incorrect based on the facts.

Quotes:

The Fed’s “ability to effectively manage the current, and any future, financial crisis” would be impaired, according to the motion. It said “significant harms” could befall the U.S. economy as well.

Response: It would be of more harm to the economy if we have banks and financial institutions that the public believes are in good financial health but in fact are insolvent.  Bad banks drive aways good banks through their bad and reckless policies.

Fed lawyer Kit Wheatley told Preska in a conference call today that she did not know how long it would take for the Fed board to search the New York Fed for records. “We really don’t know what’s in New York,” Wheatley said. “We don’t control the system of record-keeping in New York.”

Response: This is rich, so your saying we actually gave out $2 trillion in emergency loans but it was such an emergency that we didn’t keep records that would be easily accessible?  See how this game is played, even if The Fed is ruled against, they will play games about where the information is located.  This just ruins the Central Bank’s credibility.

“Experience in the banking industry has shown that when customers and market participants hear negative rumors about a bank, negative consequences inevitably flow,” Norman Nelson, vice president and general counsel for the group, said in the document.

Response: Time to cut the “crap” here, they used the word “rumors“.  This is a the quintessential case and point to what I am trying to convey.  In this case, if you released this to the public, it would be showing “facts” not “rumors” and people would react to the reality that the facts presented.  What this leads me to think when I read it without critically thinking about it is that even these facts would somehow create negative rumors that somehow would not be true.  Here the catch though, if your a bank and you need a huge loan from the government via the Fed, GUESS WHAT, you are in trouble and I would pull my deposits from you because you were not prudent enough to keep my money safe.  As long as we let this happen, bad banks will prosper and good banks will be acquired.  I love good banks because they actually provide benefit to our society as a whole.

Link to the Original Bloomberg Article

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