As the bailouts mount serious questions remain about the future formation of the economy and the government. These questions revolve not just around policies, but around principles. One of those principles that everyone–senators, congressmen, newspapers, the President–has stated support for is transparency. But, the battle for real transparency in the current cleanup of the market mess is woefully wanting.
Bloomberg reports today that the Federal Reserve has rejected their Freedom of Information Act (FOIA) request for information relating to the nearly $2 trillion in Fed loans to banks and securities firms. The Fed states that their refusal to fulfill the FOIA request is due to an “exemption under trade secrets.” Also, the source of a lot of the lending is the Federal Reserve Bank of New York, the former perch of Treasury Secretary Geithner, which is not subject to FOIA law.
Congress was able to extract some transparency from the Fed in the past, as Bloomberg recounts:
On Feb. 23, the Fed disclosed a breakdown by broad categories for $1.81 trillion of collateral pledged by banks and bond dealers as of Dec. 17 after Congress demanded more transparency from the central bank.
The largest portions of collateral being held by the Fed at that time were $456 billion in commercial loans, $203 billion in consumer loans and $159 billion in residential mortgages, according to the central bank’s Web site. It didn’t identify any loans or provide their credit ratings and said it will update the figures about every two months.
The Fed, however, is still remaining intransigent in their opposition to transparency in their lending. Aside from the refusal to disclose lending to these firms, the Fed is also refusing to provide details about the bailout of A.I.G., particularly the counterparties to the bailout. Meanwhile, the details of new transparency requirements for TARP and TALF recipients are still rather vague.
It is really important to stand firm in the insistence on transparency at the outset of this recreation of our economic and governmental spheres. All information that can be made public about the lengths taxpayer money is being used to finance the stabilization of private firms must be made available. Similarly, all efforts by private firms to influence the public sphere must be made available. The financial crisis was abetted by an institutional crisis in government caused by excessive political influence–lobbying, PAC money, campaign contributions. These influencing actions need to be made transparent just as much as the money pouring from the public coffers into private companies. That means real time transparency! When a lobbyist meets with a lawmaker or a regulator, it must be reported within 24 hours. When a CEO makes a campaign contribution, it must be reported within 24 hours.
When Louis Brandeis called for “Sunlight as the best disinfectant” (first published in 1913) he was discussing the new financial instruments of the early 20th century. His famous line was resurrected again after those financial instuments failed leading to the Great Depression. This crisis requires a more thorough implementation of Brandeis’ ideal of transparency in our government and our markets. Without that we are asking to repeat the mistakes leading up to our current situation.