Saturday, August 29, 2009

The Fed Told to Open Its Books by Federal Court

This is a development that can have pretty big implications. Last year, in the midst of the collapse of Wall Street, the Federal Reserve embarked on a series of programs to help prop up the big banks with $1.5 trillion in loans. A few months later, the Bloomberg news organization (majority owner being Michael Bloomberg, NYC's mayor) filed a lawsuit against the Federal Reserve in order to force the Fed to disclose which banks were getting the $1.5 trillion, as well as find out what assets the banks were putting up as collateral in exchange for the loans.

Cut to the present. The U.S. District Court of Manhattan ruled against the Fed, stating that the Fed must now identify the companies that they gave money (our money, mind) to. This can have quite stark implications, including the destruction of our world's financial system (according to Daily Kos). From what I can gather (I actually read about this stuff a lot, but I'm still nearly illiterate on these financial matters), the reason why the Fed and the banks don't want this information revealed is that it will highlight the true financial shape of the banks. If they are insolvent, this can cause a run on the banks by nervous stakeholders. It makes sense for people who are even outside the system to want to maintain status quo, and not have our judges or Bloomberg rock the boat too hard. But if there isn't full disclosure sooner or later, we will be going through a repeat of this in a few years' time, if not before, except only on a larger scale, with bigger bailouts, bigger bonuses to Wall Street executives, etc.

Anyway, here is a good video I found on Youtube, breaking down the situation in a way that most everyone can understand. BTW, this news source isn't an American one. I don't watch television news, but I wonder if this is being discussed at all, even on financial news outlets such as CNBC. I wouldn't bet on it.

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