Tuesday, May 12, 2009

Grandstanding

The video of Rep. Alan Grayson grilling the Inspector General of the Fed Board of Governors, Elizabeth Coleman, has been making the rounds. Grayson says that there's a Bloomberg article which says that the Fed has entered into $9 trillion of off-balance sheet transactions, and asks Coleman if she has investigated those transactions at all. After Coleman fumbles around for a while, she essentially says no. Grayson makes himself look good in this video, especially because Coleman's performance is so bad, but this is grandstanding of the highest order. First of all, the Bloomberg article never said that the Fed has entered into $9 trillion of off-balance sheet transactions. This is the article he was talking about, and the phrase "off-balance sheet" doesn't appear once. And the $9.7 trillion number refers to all money spent, lent, or guaranteed during the financial crisis by the Fed, Treasury, and FDIC. It's also very misleading, because lending $1 billion isn't the same as guaranteeing $1 billion in assets, and $5.7 trillion of that $9.7 trillion is in the form of guarantees. Second, Coleman is the IG of the Board of Governors of the Federal Reserve, not the Reserve Banks. The Fed's various lending facilities are handled by the New York Fed, and Coleman has no authority to audit the New York Fed or any of the other regional Reserve Banks. All the regional Reserve Banks have auditors, and they're all subject to regular external audits as well. Until a few years ago, the Board of Governors conducted examinations of the Reserve Banks in lieu of external audits. But some people thought that was too insular (and I completely agree), so the Board of Governors' examinations were replaced by external audits. Ironically, if there hadn't been concerns about the independence of the Board of Governors' examinations of the Reserve Banks, Coleman might have been able to answer Grayson's questions.

10 comments:

mlnberger said...

I just want to leave a general note that I find your careful precision refreshing. I look forward to each new post.

Anonymous said...

Refreshing is not the word I would choose. Saying a lawyer shows careful precision is like saying a soldier is a good marksman. Ok, fine - but who is he aiming his weapon at?

From what I have seen, this blog has one primary goal and that is to discredit opponents of the financial bailouts. Anyone who gains traction in the media for criticizing the bailouts is subjected to compartmentalized criticism with no regard for the BIG PICTURE.

EofC - Why don't you just come out and state your agenda. Defend the bailouts. From what I have seen you have not done so. Perhaps you are only capable of training your intellect on the most narrow of questions. Perhaps your thought process is merely reactive and you are capable only of criticism, rather than original and creative analysis. Or perhaps you do not want your readers to understand your true agenda.

Tell me something. How many clients of your law firm received TARP money or some other form of federal subsidy? How many billable hours were generated by these clients in the past 12 months? What was the total contribution to firm revenue?

Anonymous said...

Yes, watching C-Span really opens your eyes as to how government works. We elect people to spend as much money as possible and then only every now and then they briefly manage their employees. When their employees are questioned they never give a straight answer, they never say they will take direction from them, they only pass the buck and say it is someone else’s responsibility. I truly don’t know how our government was ever suppose to manage the systems they have created. It is surprising that it even works as well as it does. How does our Army get things done? They seem to be a more effective branch of government.

http://dailybail.com/home/there-are-no-words-to-describe-the-following-part-ii.html

Thank you for this clip. Here is something you can do about it....


Write your congressman asking him/her to support Congressman Ron Paul's bill HR-1207 "Federal Reserve Transparency Act" (currently 179 co-sponsors). America needs the Federal Reserve to be held accountable to the people!

Jalapeno's Journey said...

I support transparency in the Reserve. So many on the hill are deadset on going full blast into the fiscal ruin abyss. Take a look at California and there goes the country. Fiscal insanity is running amok and we are a country of spending schizophrenics.

Jeff Wahlen said...

What oughta be a rallying cry is "what has Grayson subsequently found out?!"

Although we may agree or disagree on the substance of the questioning and the role of the auditor, the FEDERAL RESERVE remains aloof and unaccountable.

HR 1207 might improve such transparency. So, what has Grayson found out lately?

Anonymous said...

Grayson is unlikely to find out anything. He formulated his questions from the audited statements of the Federal Reserve.

The GAO is prohibited from auditing certain areas in order to insure independence form congressmen like Grayson.

Grayson asked who approved the 553 billion. Bernanke - the Open Market Committee. The GAO can't audit them, or is limited in their audit of them. Lost on Grayson, and apparently the entire media. the 553 billion number passed the audit of Deloitte and Touche.

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