12/26/2008 05:12 am ET Updated May 25, 2011

A Turning Point: But Where Are Our Legislators?

The Fed has lent $1.5 trillion in taxpayers' money to banks, including Citigroup and Goldman Sachs. This does not include the $700 billion bailout authorized by Congress. As collateral, the Fed is accepting a bunch of securities -- but it is not telling us what these securities are.

And these $1.5 trillion are only the tip of the iceberg. Right now, Bloomberg's best estimate is that $7.7 trillion of taxpayers' money has been committed to the banking and financial system. This debt is equivalent to half the 2007 US GDP. That is not good. Further, the taxpayers did not authorize this; through our legislators we authorized the Treasury to spend $700 billion. On top of it, neither the Fed nor the Treasury are informing the public where it is all going. Legislators have made some noises. But there should have been a roar.

Bloomberg News took the plunge today and sued the government: it asked a U.S. court today to force the Federal Reserve to disclose information about the securities the Fed is accepting on behalf of American taxpayers (us!) as collateral for $1.5 trillion of loans to banks and firms. That is a good move. It demands some accountability from the Fed: we the taxpayers are entitled to know what we are getting for our bundle of "loans."

But we need more than demands for accountability. We need to stop this robbery and abuse of power. How come we have not heard from our legislators -- those who represent us. Why are they not forcing the government to disclose what they are doing with our taxes. Why are they not insisting that before authorizing these vast amounts The Fed (and the Treasury, in some cases) inform the legislature and seek authorization for some of these expenses.

The Fed has now committed to such a vast amount of debt in return for what are most probably dodgy securities, that is has become a source of national insecurity. The $7.7 billion is a vastly larger set of loans than is customary for the Fed to make available to the "economy" through a series of lending facilities.

Obama's proposal to spend $2 trillion in the real economy cannot start soon enough. Our households do not need more credit -- they need incomes. The longer we allow the Fed and the Treasury to handle the crisis their way, the deeper they sink the country and the more difficult Obama's rescue plan becomes.