Bailout opacity

November 11, 2008

This ain’t good:

The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

The Bloomberg story goes on to quote Barney Frank spouting a bunch of nonsense about it not being so bad if “the fed gets a haircut” on these loans, but that logic misses the forest for the trees.

Bad information about the state of the Fed’s credit offerings will only breed mistrust and doubts among the rest of the market’s participants. The Treasury is correct to assume that making this knowledge public will destabilize some firms. However, if the Treasury actually wants to improve things in the long run they will seek more transparent procedures since a market with grossly distorted information does not benefit anyone.

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