File photo of Federal Reserve Chairman Ben Bernanke by Peter Larson/Medill News Service.
In an unusual public response to recent news reports, the Federal Reserve posted a memo on its website Tuesday, refuting claims by some news organizations that the scale of the central bank’s lending to Wall Street banks during the financial crisis was hidden from public view — and that its loans were offered on overly favorable terms.
Bloomberg News published a report on the Fed’s lending last week, calling it a “a fresh narrative on the financial crisis of 2007 to 2009.” That report found, among other things, that banks had potentially profited from the emergency lending programs by some $13 billion dollars by borrowing money from the Fed at below-market rates. It also said that by refusing to make public the names of the neediest banks — which collectively required as much as $1.2 trillion dollars on the peak day of the lending programs — the Fed had spared them a measure of scrutiny that might have led to stricter reforms on the industry. Bloomberg based its conclusions on previously undisclosed Federal Reserve documents that they obtained through a Freedom of Information Act lawsuit.
Judy Woodruff discussed that Bloomberg report with one of its authors, Bob Ivry, last week on the NewsHour:
In its five-page memo with a cover letter from Chairman Ben Bernanke, the Fed disputed nearly every point of the Bloomberg report, though never cited it by name. The Fed memo said that “all of the programs were publicly announced when they were initiated, and information about all lending under the programs was publicly released …,” though it did go on to say that “…[i]t is true that, generally, the names of the counterparties and borrowers from the emergency facilities were not immediately disclosed, consistent with general central banking practice.” The Fed memo also criticized news outlets for making “no mention that the emergency loans and other assistance have generated considerable income for the American taxpayers.”
Late Tuesday, Bloomberg published a direct response to the Fed memo, addressing its contentions. Bloomberg News spokeswoman Meghan Womack told the NewsHour, “We have met with the Fed numerous times on this issue, and not once has the Fed ever told us that our reporting is inaccurate. We stand by our reporting.”