Thursday, December 2, 2010

What's Bernanke Hiding? Some Serious Failure to Disclose from the Fed

Despite its Wednesday document dump, it appears that the Federal Reserve selectively failed to respond to key disclosure requirements as called for in the Dodd-Frank Bill.
The Fed specifically withheld details on individual securities pledged as collateral by recipients of $885 billion in central bank loans.

For three of the Fed’s six emergency facilities, the central bank released information on groups of collateral it accepted by asset type and rating, without specifying individual securities. Among them was the Primary Dealer Credit Facility, created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed, reports Bloomberg.

“This is a half-step,” said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “If you were going to audit the facilities, then would this enable you to do an audit? The answer is ‘No,’ you would have to go in and look at the individual amounts of collateral and how it was broken down to do that. And that is the spirit of what the requirements were in Dodd-Frank.”

Most interesting, as Bloomberg notes,in the document dump under its definition of the “ratings unavailable” category for collateral posted under the Primary Dealer Credit Facility, the Fed said that “in some limited cases, ineligible collateral was pledged, but it was reviewed with the clearing banks for exclusion from future pledges.”

Over the life of the PDCF, $1.5 trillion of collateral with “ratings unavailable” was pledged, according to the Fed data.

Bernanke also omitted details on individual securities pledged as collateral under its Term Auction Facility and its Term Securities Lending Facility, which was announced on March 11, 2008, as the first program under which the Fed planned to lend to non-bank dealers.

1 comment:

  1. Can anyone provide an example of what "ineligible collateral" would constitute?