Fed Defies Transparency Aim in Refusal to Identify Bank Loans

Nov. 10 (Bloomberg) — The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

“The collateral is not being adequately disclosed, and that’s a big problem,” said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. “n a liquid market, this wouldn’t matter, but we’re not. The market is very nervous and very thin.”

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The full article includes more Fed lies, Barney Frank hot air, and some info on the AIG bailout.

http://www.bloomberg.com/…

Treasury Secretary Henry Paulson urged banks receiving $250 billion in capital injections from the government to use the funds to spur economic growth.

“We must restore confidence in our financial system,” Paulson said at a press conference in Washington. “The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.”

With the equity purchases, Paulson is using more than a third of the $700 billion in government support Congress gave him the authority to use on Oct. 3. He didn’t identify any of the lenders. People familiar with the plan said nine companies will get $125 billion: Citigroup Inc., Goldman Sachs Group Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp.

Mussolini would be tickled.

Paulson said the Treasury will dedicate $250 billion for boosting bank capital through preferred stock purchases. The regulators said in a statement that “thousands” of financial companies would participate.

Participating banks will need to accept limits on executive pay and so-called golden parachute payments. They also will need to give the Treasury warrants for an amount equal to 15 percent of the senior preferred investment, with a strike price determined by the bank’s share price at the time of issuance.

The senior preferred shares will pay a dividend of 5 percent for the first five years and 9 percent after that, the Treasury said. The purchase price of the stock will be the market price of the banks’ common shares at the time of the transaction. Companies will be able to buy back the equity at par after three years.

The possibility for this to turn out bad is pretty high. Even should the companies buy back their shares and the government get out completely from this setup… the precedent alone is incredibly dangerous. What will this mean for these corporations? How involved will the government get? Now that they are partial owners all previous barriers are gone.

It just gets worse by the day.

http://mindbodypolitic.com/…

“Neel Kashkari, the Treasury’s assistant secretary for international affairs, was selected Monday to be the interim head of Treasury’s new Office of Financial Stability.

The designation was made by Treasury Secretary Henry Paulson, who was the head of Goldman Sachs before he joined the Bush administration in 2006. Kashkari, 35, will head the office created by the emergency legislation enacted Friday to fund the largest government bailout in history…”

Kashkari worked for Goldman as a Vice-President. Is this brazen?

Side-note: he has a connection to NASA.

CALL CONGRESS AND ASK FOR GOLDMAN SACHS OUT OF THE US GOVERNMENT

They don’t even try to hide it. Why should they when they get away with it anyway?

UPDATE:

Yahoo’s coverage

http://news.cnet.com/…

IRS undercover operations: Privacy invasion?
The bailout bill also gives the Internal Revenue Service new authority to conduct undercover operations. It would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on. (Think IRS agents posing as accountants or tax preparers and saying, “I’m not sure if that deduction is entirely legal, but it’ll save you $1,000. Want to take it?”) That section had expired as of January 1, 2008, and would now be renewed.

Starting with the so-called Anti-Drug Abuse Act in 1988, the IRS has possessed this authority temporarily, with occasional multiple-year lapses. A 1999 internal report said the IRS had 126 “trained undercover agents” working in field offices at the time. This is the first time that such undercover authority would be made permanent.

Sens. Max Baucus (D) and Chuck Grassley (R) have been pushing to make it permanent for a while, claiming (PDF) in April that: “Undercover operations are an integral part of IRS efforts to detect and prove noncompliance. The temporary status of this provision creates uncertainty, as the IRS plans its undercover efforts from year to year.”

There’s another section of the bailout bill worth noting. It lets the IRS give information from individual tax returns to any federal law enforcement agency investigating suspected “terrorist” activity, which can, in turn, share it with local and state police. Intelligence agencies such as the CIA and the National Security Agency can also receive that information.

The information that can be shared includes “a taxpayer’s identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer’s return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return.”

That provision had already existed in federal law and automatically expired on January 1, 2008.

What’s a little odd is that there’s been little to no discussion of the IRS sections of the bailout bill, even though they raise privacy concerns. Treasury Secretary Henry Paulson said this week: “I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy.” He never mentioned the necessity of additional IRS undercover operations.

While everything is going on and the abolition of the Fed is on many people’s minds… lets not forget the terrible things the IRS does and that it too needs to be abolished.

http://www.reuters.com/…

California Gov. Arnold Schwarzenegger has informed U.S. Treasury Secretary Henry Paulson that the most populous U.S. state may need to turn to the federal government for short-term financing because of a lack of liquidity in credit markets.

California needs $7 billion to cover short-term expenses and has planned to issue revenue anticipation notes for it.

“Absent a clear resolution to this financial crisis that restores confidence and liquidity to the credit markets, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the Federal Treasury for short-term financing,” Schwarzenegger said in a letter to Paulson dated Oct. 2 and provided to Reuters on Friday.

“The economic fallout from this national credit crisis continues to drain state tax coffers, making it even more difficult to weather the continuation of frozen credit markets for any length of time,” Schwarzenegger said, adding he supports a $700 billion emergency financial rescue plan due to be voted on Friday by the U.S. House of Representatives.

It’s not like we’ve had states go bankrupt before. Perhaps California will be the first in modern times. One can only hope.

I know that many of us were deeply disappointed when the U.S. House of Representatives today failed to pass Treasury Secretary Henry Paulson’s emergency stabilization plan. We believe that the defeat of this plan is not only bad for the markets and for our firm - but a dangerous course for the country with negative consequences for people far from Wall Street.

Indeed, following the vote today, the financial markets sent Congress a loud and clear message about the consequences of Congress’s failure to respond to the financial crisis at hand - sending the Dow down more than 700 points. In the aftermath of the vote and the market’s reaction, the leaders of both parties have vowed to regroup and consider how they can bring the financial market rescue package back to the floor of the House for successful reconsideration.

We believe it is critical that members of Congress hear about the importance of passing a plan this week.

If you share this view, I encourage you to call your Congressman and Senator at (202) 224-3121 and let them know how important this plan is for the American economy.

Translation: “We fucked up and now you need to bail us out or it’ll hurt you too. We promise.”

The individual who released this received 13.33 times his salary as his bonus in 2006 and after all other forms of compensation are calculated in: over 20 times. Much of that was stock. My guess is a bailout by the taxpayers would significantly impact his bank account. I think it’s safe to say that likely has a significant impact on his opinion. I’m not seeing any hesitation, no condemnation of the CRA, no concern for artificially low interest rates, moral hazards or the Federal Reserve System.

If the company he works for can’t keep itself afloat without interference by the government it deserves to fail.