As the sheer volume of the Fed financing makes clear, the bailout of the financial sector involves more than the $700 billion approved by Congress in late 2008. The Federal Reserve’s $2 trillion of secret deals is by far the largest portion.
Why are the Fed and the banks fighting so hard to keep the loan details secret?
Congress and taxpayers cannot know until they have the information the Federal Reserve is keeping from them, but several plausible explanations exist.
One is that the Fed has taken a great deal of worthless collateral and is propping up failed companies and banks. A second is that the information will make the issue of paying out huge Wall Street bonuses in 2009 politically radioactive, particularly if it turns out the payments are dependent on these federal loans.
Finally, the Federal Reserve probably does not want that information to be part of the forthcoming Senate hearings on the re-confirmation of Ben Bernanke, current Chairman of the Federal Reserve.
If President Obama seriously wants transparency and accountability, the place to start is Ben Bernanke’s confirmation hearing.
The President and the U.S. Senate should put Bernanke’s nomination on hold until the Federal Reserve makes public the detailed information about these unprecedented $2 trillion of secret loans.