Emails between senior Federal Reserve Board officials obtained by the Huffington Post reveal an organization dedicated to resisting transparency -- so much that officials stymieing congressional attempts to get them to disclose vital information cynically put the word "transparency" in quote marks.
The e-mails are part of a trove of 250,000 documents the NY Fed's board produced in response to a subpoena issued by the House Committee on Oversight and Government Reform.
In November, Congress was trying to get the New York Federal Reserve to disclose details about payments to its counterparties that were paid for with $27.1 billion in taxpayer money. Federal Reserve Board Chairman Ben Bernanke was asked at a committee hearing by Rep. Carolyn Maloney (D-N.Y.) whether he would tell Congress about the identities of the counterparties.
"I think that information can be made available," Bernanke told her.
The answer led to news articles suggesting that the information would soon be released, but the Fed had other ideas. Brian J. Gross, special assistant to the board serving as congressional liaison, forwarded around the testimony and asked senior officials what they suggested.
"My suspicion is that we will not be able to provide this info. So, we'll need a strong CLO [Congressional Liaison Office] response!!" replied Scott Alvarez, the Board's general counsel.
The Fed then decided it was time to burnish its public-relations image. "I think we need to consider a change in our press strategy (I know this isn't like us....but with the 'transparency' efforts that the Board is undertaking, it could fit well into that....)," wrote Sarah Dahlgren, who was heading up the New York Fed's AIG operations.
Gross wrote to senior officials again following a critical Wall Street Journal editorial.
All - If we haven't already, we need a full explanation for [Fed Vice Chair] Don [Kohn] when he is asked this question (from today's WSJ editorial, also raised at the Chairman's Senate Budget hearing--repeatedly--today):
Perhaps someday the feds will even explain to the taxpayers which AIG creditors had to be rescued and why.
This is emerging as a real rallying cry on the Hill ... and further contributing to complaints about "Fed secrecy."
Two days later, Dahlgren, in the same e-mail that suggested a new press strategy, mocked the notion of transparency and noted, as well, that Congress is concerned that money went overseas -- "they HATE that," analyzed Dahlgren:
will be interested to see how the Govs want to deal with this -- now they are being asked for not only the counterparties but also ALL of the creditors that have been made whole because of Federal monies to AIG (so, do we start listing the aunt minnies and uncle lous with life insurance policies?...I know I'm going to the extreme, but......) - also, will they next ask about Citi's counterparties? BofAs?....
the loud cry today from congress (broadly, since we also met with house folks today) is for the Fed to be out in front more - telling the plain English story of what we've done and why....(and we haven't done this)....I think we need to consider a change in our press strategy (I know this isn't like us....but with the "transparency" efforts that the Board is undertaking, it could fit well into that....)
(and there's concern that the money didn't just go to domestic banks, but went overseas....and they HATE that....).....
Rep. Darrell Issa (Calif.), the ranking Republican on the House committee and the driving force behind the chamber's AIG investigation, said that the e-mails show an institution that feels no need to be accountable to the public and disdains the very notion of transparency.
Treasury Secretary Tim Geithner was president of the New York Fed when it bailed out AIG. Sen. Byron Dorgan (D-N.D.) has said he will oppose Bernanke's reconfirmation if he continues to stonewall Congress in its attempt to divine who the Fed has given money to and why.
"The Federal Reserve Bank of New York last week delivered detailed records requested by the House Committee on Oversight and Government Reform related to American International Group, Inc. We look forward to responding to questions about the documents at the Committee's hearing later this week," Deborah Kilroe, a spokeswoman for the New York Fed, told HuffPost. "We believe that these materials demonstrate that the New York Fed's actions assisted AIG in ensuring the accuracy of its disclosures and protected important U.S. taxpayer interests." She also referred to this statement.
Issa sees the culture that has been fostered as a failure of leadership.
"It's become very clear that 'transparency' was nothing but a burden and political obstacle for the Fed to overcome," he told HuffPost. "Decisions regarding disclosure were made based on public relations, rather than public benefit. This culture of secrecy was so pervasive throughout the Fed, it raises legitimate questions about the leadership of those who were charged with over-seeing the AIG deal and decisions to hide public disclosure at all costs."
In a press release touting the release of the 250,000 pages to the committee, the Fed said: "We believe that these materials demonstrate that the FRBNY's actions assisted AIG in ensuring the accuracy of its disclosures and protected important U.S. taxpayer interests."