BOB GARFIELD: From WNYC in New York, this is NPR’s On the Media. I'm Bob Garfield.
Okay, here’s the deal. Brooke Gladstone took a bit sick this week after she finished her interviews but before she recorded her introduction, so I'll handle that for her. Just imagine me as a stunning brunette. And here we go:
So it turns out that the $700 billion congressional bank bailout that made headlines back in September doesn't begin to encompass the amount of taxpayer money The Federal Reserve has really been loaning to banks. See, there’s this other two trillion dollars.
That’s what Bloomberg News reported this week. But we don't know much about those deals, and we're supposed to. After all, here’s Treasury Secretary Henry Paulson back in September. TREASURY SECRETARY PAULSON: We need oversight. We need protection. We need transparency. I want it. We all want it. BOB GARFIELD: But apparently The Fed doesn't want it, fearing, we suppose, that if we were aware of which banks were getting the money or what they were putting up as collateral for it, we would get nervous about them.
On Wednesday, at least five Republican members of Congress called for The Fed to disclose which financial institutions are borrowing taxpayer money and what troubled assets The Fed is accepting as collateral. Bloomberg News has gone a step further and is suing The Fed under the Freedom of Information Act.
Bloomberg News Editor-in-Chief Matt Winkler says despite following the story for more than a year, they haven't been able to learn some of the most basic facts about this two trillion dollars. MATT WINKLER: We have no idea what the collateral is and we don't know who is receiving these loans. You know, when The Federal Reserve was conceived in the early part of the 20th century, the subject of The Fed’s monetary activities wasn't a mystery.
What is different now is that for the first time, and really this is unprecedented, The Fed is now accepting all kinds of troubled assets. And so, we just think it’s appropriate for the American taxpayer to know, well, what is this collateral that The Fed is now putting on its balance sheet on behalf, if you will, of the American taxpayer. BROOKE GLADSTONE: And basically what they're telling Congress and the rest of us is, don't worry, we have collateral but I'm not going to tell you what it is. So it could be a $30 million home or it could be an old sneaker. MATT WINKLER: That's absolutely right. And the reason why this is such an important issue is because there actually are a lot of people in the marketplace right now who say that the market is going to continue to be troubled as long as the Treasury and The Fed maintain, if you will, this opaque wall between what The Fed and the Treasury are doing and the market. BROOKE GLADSTONE: Why would the opaque wall – I mean, I’m against it, I suppose, on principle, but why would that lead to a continuation of our time of troubles? MATT WINKLER: Well, we'd all like to know what the truth is. What is the value of these assets? If The Fed is taking them on its balance sheet, that means The Fed is buying and selling assets from these troubled financial institutions to help them so that they can lend money as they used to lend money, in a normal way.
The marketplace would benefit from knowing what those values are. And as soon as the marketplace does know well, that’s going to help the market begin recovery. It’s kind of like once you know what the disease is, then it’s a lot easier to begin thinking about, well, what should the cure be. BROOKE GLADSTONE: I was surprised when I read in one of Bloomberg’s stories Barney Frank seemed to agree with one financial expert saying – and I have the quote here – “You have to balance the need for transparency with protecting the public interest. Taxpayers have a right to know where their tax dollars are going. But one piece of information standing alone could undermine public confidence in the system.” Do you think that this notion that this kind of information could harm the economic recovery by instilling more fear holds water? MATT WINKLER: Well, that’s one interpretation. [BROOKE LAUGHS] But who should make that judgment? There are plenty of professionals in the credit markets whose living depends on managing debt securities. Their argument is the market will continue to be dysfunctional as long as the troubled assets that The Fed is buying and selling remain opaque.
That’s just a pretty sensible explanation why The Fed should take the step of disclosing this and let us, being everybody, figure out how to deal with reality. That’s one argument.
The second argument, of course, is it’s everybody’s money who is an American citizen and, therefore, they are entitled to know this. BROOKE GLADSTONE: I wonder, do you think there’s too much focus on the $700 billion? That number’s imprinted on our brains, whereas really the amount of taxpayer money being loaned out is almost three times that amount. MATT WINKLER: I do think it’s important that we keep in focus the biggest number, because [BROOKE LAUGHS] that puts it in perspective, the magnitude, if you will, of the credit calamity we're in.
And just two years ago, if I told you that The Federal Reserve would have loaned two trillion dollars to a variety of financial institutions, and you don't know which institutions they are, and it’s because they're all in trouble, you would have probably suggested that I was speaking about another country, and maybe on another planet. BROOKE GLADSTONE: [LAUGHS] Matt, thank you very much. MATT WINKLER: Thank you. BOB GARFIELD: Matt Winkler is the editor-in-chief of Bloomberg News. We asked The Federal Reserve Board for a comment. A spokesman declined, saying they couldn't discuss ongoing litigation.