Out of Control (I Told You So pt. 2)

I've been reviewing some of the most recent information about the TARP program (Troubled Assets Relief Program). And I've dragged out of the online financial mire some interesting information that just isn't getting the attention it deserves. If you've been following the bailout news at all, you know that it's costing the American taxpayers about 700 billion dollars. And that more businesses, especially the automotive industry, are asking for a slice of the total, or even better, a bailout of their own. And lawmakers are seriously considering it. So not only is the program failing to bring about the stability that was promised. But it's also growing in amount, and branching out into other industries. These manuvres are in lock step with what I predicted in my other posts. But silly me, I gave the government, and their quasi-government “helpers” at The Federal Reserve, some credit (catch the pun?). I thought the massive amount they were confiscating publicly was all they would get.

Little did anyone know, they would get far more. But The Fed didn't make this massive addition public. What's most shocking, though, is that they're not accountable to anyone. So why just confiscate 700 billion, and be accountable for it, when you can confiscate over 2 trillion, and be accountable for less than half? Let's just go for broke. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aS1eWoJj0sKc

That's right. I said 2 trillion. Henry Paulson and the people at The Federal Reserve are now taking on the responsibility of doling out more than 2 trillion dollars. In an impressive and rapid response, Bloomberg News filed a freedom of information act request, demanding clarity in these massive transactions. It's important for taxpayers to know where their money is going. But the Federal Reserve refused. Bloomberg followed up by filing a lawsuit demanding disclosure. And still today the Fed is thumbing its nose.

The crux of this issue, though, isn't that they don't want to turn over their books for inspection. Any reasonable person can understand that what is essentially a client list is proprietary information. And the federal reserve isn't necessarily run by the government. So they don't have to turn over their books, unless they are accused of criminal activity. Which they're not. The real problem is that they have acquired another 1.3 trillion dollars in taxpayer monies without congressional approval.

This is no little booking error. It was a conscious decision – probably by a number of people working within The Fed. So it begs some serious questions. How did The Fed get it? Who within (or outside) The Fed authorized the use of these extra taxpayer funds? What authority do they have to do such a thing? What standards were used in making the decision to continue the program outside of congressional oversight? What standards will be used to decide who gets the additional money? Why, if the amount is so enormous, and the money not theirs, would they knowingly deny the rightful owners of the dollars access to their information? Was denial of this access predetermined? What was the original destination of the additional funds? Were they to be used in other programs that will now be underfunded?

To wit. What gives them the right? I smell a hideous abuse of power here. The last time I checked, it was criminal for private individuals to simply take taxpayer dollars. If they have confiscated the money, it could very well be a criminal act. If it's a loan they intend to pay back, the people deserve disclosure. But no charges have been filed – yet.

That much is shocking. But now is where the story gets funny, and borders on the ridiculous. When questioned about the extra money, Fed Chairman Ben Bernanke stated that he thinks disclosure would be “counterproductive.” His reason?

“There is a concern that if the name is put in the newspaper that such-and-such bank came to the Fed to borrow overnight for a perfectly good reason, that others might begin to worry 'is this bank credit worthy?' and that might create a stigma, a problem, and might cause banks to be unwilling to borrow, and that would be counterproductive.”

He's worried about their... reputations. So he's denying access to the information about what he's doing with huge amounts of taxpayer dollars, because he's worried about the banks getting a bad name. Isn't it a little late for that? He sought to alleviate concern over that issue by following up with statements like “We take collateral,” and the loans are “very safe.” So this begs another question. If you take collateral, and the loans are clearly safe, why not let everyone see your info? If what he said were actually true, it would be obvious to anyone with a little bit of interest. Reputations would remain in tact, and transparency would help to lessen any emerging Big Brother fears. (When was the last time you got a loan for a home, or even just a car, without telling every little financial detail to the people giving you the loan?) But all the while, Henry Paulson is testifying: “We need oversight. We need protection. We need transparency. I want it. We all want it.”

So this becomes strangely dysfunctional. What a pair, these two. Is this a conscious out-of-touch-with-each-other act? Is it unintentional? Or are they really on separate pages? Are they playing good cop/bad cop? Or are they the keystone cops? We might have to wait until charges are filed. Or at least until someone resigns.

Meanwhile, your dollars are getting sucked out of The Federal Reserve's doors as if there's a giant money vacuum outside. All of it essentially vaporising into no one knows where. I take that back. Only Henry Paulson and Ben Bernanke know where.

Here are some quick links giving just the numbers on how much the bailout is costing us, and who has received money so far.
http://www.breakthebailout.com/node/3
http://www.ritholtz.com/blog/2008/11/tracking-the-bailout/

Mises.org offers a lot of free books on line. One of them that's of particular interest right now is this book by Jorg Guido Hulsmann, explaining why deflation isn't what the politicos and the media make it out to be. It's only about 45 pages, and definitely worth the read.

Here is a website dedicated to following just the bailout.

Here is a Wall Street Journal discussion board video that takes about 4.5 minutes.

Here are some more links from mises.org, my favorite site, just in case you're starting to get a little skeptical about whether or not the bailout will actually work. Market corrections are good – not bad.

Consumers Don't Cause Recessions

Markets Need Time, Not More Poison

Financial Crisis and Recession

In Praise of Bankruptcy