Thursday, August 27, 2009

Federal Reserve Says Disclosing Loans Will Hurt Banks, Economy

This is how the Fed operates. When it doesn't get its way, it threatens us with the destruction of the entire economy. Nobody's buying it anymore.

    Bloomberg -

    Aug. 27 (Bloomberg) -- The Federal Reserve argued yesterday that identifying the financial institutions that benefited from its emergency loans would harm the companies and render the central bank’s planned appeal of a court ruling moot.

    The Fed’s board of governors asked Manhattan Chief U.S. District Judge Loretta Preska to delay enforcement of her Aug. 24 decision that the identities of borrowers in 11 lending programs must be made public by Aug. 31. The central bank wants Preska to stay her order until the U.S. Court of Appeals in New York can hear the case.

    “The immediate release of these documents will destroy the board’s claims of exemption and right of appellate review,” the motion said. “The institutions whose names and information would be disclosed will also suffer irreparable harm.”

    The Fed’s “ability to effectively manage the current, and any future, financial crisis” would be impaired, according to the motion. It said “significant harms” could befall the U.S. economy as well.

    The central bank didn’t say when it would file its appeal.
    [...]
    “Experience in the banking industry has shown that when customers and market participants hear negative rumors about a bank, negative consequences inevitably flow,” Norman Nelson, vice president and general counsel for the group, said in the document. “Our members have accessed the discount window with the understanding that the Fed will not disclose information about their borrowing, especially their identity.”