U.S. Economic/Financial News

Biggest Bank Bailout Remains Hidden; Fed Says Too 'Dangerous' To Reveal

Dec. 12 (EIRNS)—Since the fatal mid-September rush of Wall Street bank failures, bailout money-printing by the Federal Reserve has dwarfed the Treasury's more infamous bailouts, by six or seven times; but neither U.S. elected officials, media investigators, nor the public know anything about it. All that is known is that in mid-September, Fed Chairman Ben Bernanke abandoned a century-old rule of requiring of banks at least the figleaf of AAA-rated collateral for borrowing from the Fed; and that Fed credit outstanding to banks—already growing geometrically since March—skyrocketed after mid-September from $890 billion to $2.09 trillion. Which zombie banks have been kept in motion only by this money-printing, is one of many dangerous unknowns.

The Fed said today said that what would be really dangerous, would be to reveal anything about this matter, or the securities it has taken as collateral, and in many cases appears to have bought, in effect, from the banks. The Fed refused to respond to a second Freedom of Information Act (FOIA) suit by Bloomberg News, for information on "to whom" the $2-plus trillion has been lent and "against what collateral." It has also rebuffed all Congressional efforts to get the information, although Bernanke and Treasury Secretary Paulson both promised "transparency" to Congress in September.

The refusal letter written to Bloomberg News by Fed spokeswoman Jennifer Johnson said: "In view of current circumstances, it would be a dangerous step to release this otherwise confidential information.... The Board must protect against the substantial, multiple harms that might result from disclosure.... Loss in confidence in and between financial institutions can occur with lightning speed and devastating effects."

Dubiously, the Fed claimed it may use the "trade secrets" exemption from responding to FOIA suits, although the secrets here are those of the zombie banks it's lending to, rather than its own secrets—which could be even more "dangerous" to reveal.

Citadel Stops Withdrawals from Two of Its Hedge Funds

Dec. 13 (EIRNS)—Chicago-based hedge fund manager Citadel Investment Group LLC halted year-end withdrawals from two of its biggest hedge funds, after withdrawals hit $1.2 billion, or 12% of its assets. The two funds have lost 49.5% of their value this year through Dec. 5, reports Bloomberg. The agency adds that, according to various consulting firms that track such things, about $300 billion, or 18% of hedge fund assets were subject to withdrawal restrictions as of October and hedge funds, overall, have lost 18% so far this year.