The Fed vs Bloomberg, ST OMO edition

By Felix Salmon
May 31, 2011
Dave Altig, who wonderfully moved Macroblog over to the Atlanta Fed when he took a job there, is very unimpressed with Bob Ivry's Bloomberg piece on that obscure short-term loan scheme by the Fed.

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Dave Altig, who wonderfully moved Macroblog over to the Atlanta Fed when he took a job there, is very unimpressed with Bob Ivry’s Bloomberg piece on that obscure short-term loan scheme by the Fed.

Altig’s main point is that the ST OMO scheme was not secret at all: to the contrary, it was publicly announced! This is true — but it’s also true that Ivry linked, in his story, to the exact same announcement. (Click on the word “adapted,” in paragraph eight.)

Here’s Ivry Altig:

These transactions were hardly, in my view, “secretive.”…

While it is true that specific transactions with specific institutions were not published in real time, the overall results of the auctions (both total purchases and the lowest interest rate paid) were posted each day (as noted in the Bloomberg article), and the list of potential counterparties (the primary dealers) was (and is) available for all to see. I suppose we could have a reasonable debate about how much information is required to support the claim that “details” were made available. But I have a hard time with the notion that publicly announcing the program, offering details on size and prices in each day’s transactions, and providing general information about the entities in the game constitutes “secretive.”

With some of this I come down on the side of Altig, and would actually go even further than he does: Ivry does not say that the Fed posted the results of the auctions each day. There are only two points in Ivry’s article where he hints at what information the Fed did make public. The first is when he hyperlinks the term ST OMO on first use, sending readers to a Federal Reserve search page. And the second comes in a discussion of Goldman Sachs:

Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, tapped the program most in December 2008, when data on the New York Fed website show the loans were least expensive. The lowest winning bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New York Fed data show. At the time, the rate charged at the discount window was 0.5 percent.

Stephen Cohen, a spokesman for Goldman Sachs, declined to comment.

You have to read this very carefully indeed to get the point that information about individual loans was published on the New York Fed website, rather than to simply get the main thrust of the passage, which is about Goldman Sachs.

On the other hand, Altig makes the Fed seem a lot more transparent than it actually is. For instance, he produces this chart:

chartwi.jpg

Generating this chart is decidedly non-trivial. But still, there’s no indication in Ivry’s piece that putting this chart together would even be possible.

In order to generate a chart like this, you need to go to that NY Fed search page, and type in the dates March 2008 to December 2008. When you do that, a very long page appears, giving you a long list of the temporary open market operations the Fed conducted in that period. You can export that data in Excel format, where column I shows you the operations which were 28 days long — the ones that Ivry was writing about. So you then sort by column I (Term-CD), and then by date. You can then show the size of each operation (column AG, “Total-Accept”), and the average interest rate charged (column AC, “MBS-Wght Avg):

stomo.jpg

From reading Ivry’s story, I had no idea I could put together this chart. But the fact is that this data is highly inaccessible: unless you have someone like Altig holding your hand and explaining exactly what you have to do, you’re very unlikely to be able to find it.

And certainly the Fed gives no information at all about which banks took advantage of the ST OMO scheme. Altig is a bit disingenuous when he says that the list of primary dealers is public: yes, it is, but as we saw with Ivry’s article, there’s a huge difference between the primary dealers, who were eligible to participate in the scheme, and the list of European banks who actually used it.

More to the point, after formally announcing the program at inception, and dutifully ensuring that hard-to-parse data was buried on its website somewhere, the Fed did nothing to help public understanding of ST OMO, or even to help the public know that it existed. Transparency isn’t just about clearing some theoretical bar of public disclosure: it’s about ensuring that the public knows what you’re doing. And until Ivry’s article came along, the public — including Barney Frank — did not know about this scheme. Instead, they were told about it in the kind of way which seems designed to make sure that nobody notices. And when Bloomberg started asking for extra details about ST OMO, the Fed fought all the way to the Supreme Court in an attempt to avoid providing that information, for no good reason at all.

The Fed has a deeply-ingrained culture of secrecy, and virtually everything which goes on at the New York Fed (as opposed to at the level of the Board of Governors in Washington) is made public only begrudgingly, in an opaque and unhelpful manner — if, that is, it’s made public at all. That helps to set up an adversarial relationship between the New York Fed, on the one hand, and reporters, on the other. If Altig wants to know why Ivry was less than generous to the Fed in his story, that’s why. Maybe if the New York Fed cooperated more with requests for help and information, instead of fighting those requests in the courts, Altig would find less in the press to complain about.

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