Last week, the American people were finally informed on what the Federal Reserve has done with some of their money behind closed doors. It was revealed that one of the largest recipients of the Fed’s money was foreign banks during the 2008 economic downturn. We can’t say that we’re surprised. The Fed fought tooth and nail to keep these documents secret for a reason.
The Federal Reserve was court ordered to release more than 28,000 pages of documents. Back in 2008, late Bloomberg News reporter Mark Pittman requested documents through the Freedom of Information Act (FOIA) regarding banks that received loans from the Federal Reserve in the aftermath of the 2008 financial crisis. The FOIA requires all government agencies to disclose their records to any person who requests them in writing. The Fed, however, refused to disclose the names of banks and other companies that they bailed out. They claimed that releasing this information would stigmatize and hurt borrowing banks by causing “severe and irreparable competitive injury.” It’s clear that the Fed is desperately trying to keep their books hidden for their own sake.
In November 2008, Mark Pittman wrote “Americans have no idea where their money is going or what securities the banks are pledging in return.” Taxpayers deserve to know who America’s central bank bailed out. Bloomberg decided to sue the Federal Reserve in order to receive this secret information. It has been a long and costly process. The Fed continuously appealed court decisions that ruled in favor of Bloomberg. The central bank repeatedly requested for delays in releasing the court-ordered documents. The Federal Reserve took their fight for secrecy all the way to the Supreme Court. The Fed fortunately lost.
What was the Fed hiding? Bloomberg News reports that “The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record.” Campaign for Liberty lists some of the foreign banks that received bailouts:
- Brussells and Paris based Dexia SA received 33 billion dollars
- Dublin based Depfa Bank Plc received 24.5 billion dollars.
- The Bank of China borrowed 198 million dolllars.
- Arab Banking Corp, 29% owned by the Libyan central bank at the time, received 73 different loans.
Possibly the most surprising disclosure was that the Fed lent money to a corporation partly owned by Libya’s central bank. This even occurred while America had strict economic sanctions against Libya. It is indeed strange that we are waging war on the nation that the Fed recently loaned at least $5 billion.
More shocking information may come to light in the near future. Concerned citizens are still examining the 28,000-plus pages. Some have already claimed that the numbers in the reports do not add up. Billions of dollars may be missing from their public records.
These released Federal Reserve documents are further evidence that we need a true and comprehensive audit of the Fed. This was just a one-time and limited release of their records. While these documents are disturbing enough, just imagine what kind of mischief we would find out through a real audit. The Federal Reserve loaning billions to foreign banks may just be the tip of the iceberg. One thing is for certain. The Federal Reserve will do almost anything to protect their privileged secrecy.
I urge you to call your representatives and tell them to cosponsor Rep. Ron Paul’s (R-TX) H.R. 459 and Sen. Rand Paul’s (R-KY) S. 202 the Federal Reserve Transparency Act of 2011.
Click here to read Dr. Judy Shelton’s A Guide to Sound Money co-published by FreedomWorks and the Atlas Economic Research Foundation.