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The Fed today released details identifying thousands of transactions including bonds bought under its mortgage purchase program and asset-backed commercial paper pledged under its Asset-Backed Commercial Paper Money-Market Mutual Fund Liquidity Facility.
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The Federal Reserve withheld details on individual securities pledged as collateral by recipients of $885 billion in central bank loans, denying taxpayers a measure of the risks they faced from its emergency aid.
The central bank yesterday released data on 21,000 transactions from $3.3 trillion in emergency lending to stem the financial crisis. July’s Dodd-Frank law required the Fed to disclose the names of borrowers, the size and interest rates of loans, and “information identifying the types and amounts of collateral pledged or assets transferred.”
For three of the Fed’s six emergency facilities, the central bank released information on groups of collateral it accepted by asset type and rating, without specifying individual securities. Among them was the Primary Dealer Credit Facility, created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.
“This is a half-step,” said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “If you were going to audit the facilities, then would this enable you to do an audit? The answer is ‘No,’ you would have to go in and look at the individual amounts of collateral and how it was broken down to do that. And that is the spirit of what the requirements were in Dodd-Frank.”
ed spokeswoman Susan Stawick in Washington declined to comment.
Public Disclosure
The public disclosure of the lending data should have been prevented because it could spur runs on the banks listed, said Darrell Duffie, a finance professor at Stanford University.
“That’s a very destructive process,” he said. Still, with the data released, “if you’re justified in getting the information, then you’re justified to get enough information to judge the risk the Fed took,” he said.
Under its definition of the “ratings unavailable” category for collateral posted under the PDCF, the Fed said that “in some limited cases, ineligible collateral was pledged, but it was reviewed with the clearing banks for exclusion from future pledges.” The central bank didn’t elaborate.
The secrecy surrounding Fed bailouts led lawmakers to demand disclosure after the central bank approved aid dwarfing the federal government’s $700 billion Troubled Asset Relief Program.
See More here: http://www.bloomberg.com/news/2010-12-01/taxpayer-risk-impossible-to-know-for-some-fed-financial-crisis-programs.html
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