The Secret That Will Destroy the World's Financial System
Fri Aug 28, 2009 at 06:11:34 AM PDT
There's a secret out there.
A secret so incredible, so horrifying, so toxic that if the public ever heard about it, it would destroy the world's financial system.
That sounds like a big claim.
Who's making it? Not some scary Chicken Littles in the Daily Kos diaries. Not some Doomer site. Not wacked-out gold bugs. Not Ron Paul.
This claim is being made by a consortium of the world's biggest and most powerful banks.
What's the secret they don't want you to know?
It all starts here:
In November of last year, the Bloomberg news organization sued the Federal Reserve bank of the United States. The goal of the suit was to force the Fed to disclose information on the alphabet soup of lending programs it created in 2008 to help prop up Wall St. banks:
Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.
The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn't seek money damages.
"The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry," said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.
The suit sought to reveal which banks were getting which part of the $1.5 trillion dollars and what assets the banks were putting up as collateral for the loans.
The Federal Reserve fought the case and ...
They lost it:
The Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit.
Manhattan Chief U.S. District Judge Loretta Preska ruled against the central bank yesterday, rejecting the argument that loan records aren’t covered by the law because their disclosure would harm borrowers’ competitive positions.
The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, most put in place during the deepest financial crisis since the Great Depression, saying that doing so might set off a run by depositors and unsettle shareholders. Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued on Nov. 7 on behalf of its Bloomberg News unit.
The Federal Reserve has to identify the companies to whom it gave the $1.5 trillion dollars and it has to list the assets used as collateral for the so-called "loans."
The Federal Reserve says that this might "unsettle shareholders."
OH MY GOD NO, NOT THE SHAREHOLDERS, NOT OUR PRECIOOUSSS SHAREHOLDERS!
Apparently, that is the standard these days.
And since when has the government felt obligated to protect the share prices of certain private businesses over others? Is that role in the Constitution somewhere?
Anyway, an industry group representing the biggest and most powerful banks on the globe, including British, French, Dutch and German as well as American banks, have issued a warning about the disclosure:
If you tell who got the $1.5 tril, you're gonna destroy the world financial system.
The secret is just that big.
(Note that I'm linking to Zero Hedge here, not because I endorse the editorial theme of the blog at all, but because they are the only place I could find that carries the original document in toto.)
The world might "get destroyed."
But we've also got to have access to this information.
For the simple reason that, if we don't, we're going to see a repeat of this in a couple of years with even bigger numbers, bigger handouts from the Fed and the Treasury, bigger payouts to Wall St. executives and other insiders ...
And even bigger secrets that the public can never know.