Central bank secrecy datapoint of the day

December 12, 2011
moaned on many occasions about the secrecy of the Federal Reserve, which can and should be much more transparent than it is.

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I’ve moaned on many occasions about the secrecy of the Federal Reserve, which can and should be much more transparent than it is. But Bloomberg’s latest story on secretive Fed lending is a helpful reminder that while the Fed is opaque by US government standards, it’s positively crystalline by global central-banking standards.

The subject of the story is the set of unlimited swap facilities that the Fed set up during the crisis with the world’s big central banks. Any time they wanted to lend out dollars, they could borrow as many dollars as they wanted from the Federal Reserve, putting up their own domestic currency as collateral. At the peak of the crisis in December 2008, the Fed had lent out as much as $586 billion under these facilities, most of it to the European Central Bank.

Bloomberg’s problem with this is that once you’ve followed the money to the ECB, the trail goes cold — the ECB won’t say which banks it lent those dollars to. Because while the Fed has revealed the names of the banks that it lent money to under various programs, no other central bank has followed its lead.

The ECB won’t publicly disclose names of borrowers under any circumstances and doesn’t share the identities outside the 17 euro-area central banks, a spokesman wrote in an e-mail…

The Bank of Japan, which tapped 3.9 percent of the aggregate swap dollars according to the GAO, has no plans to publicize borrowers’ identities and declined to comment on whether it shares the names with the Fed, a spokesman said. The Swiss National Bank, which accounted for 4.6 percent, “as a matter of principle” doesn’t publish counterparties, said Walter Meier, a spokesman.

The Bank of England doesn’t publish details of individual financial institutions’ use of its facilities.

Placed in context, then, the Fed’s secrecy and resistance to releasing information makes a bit more sense: it’s just doing what central banks all over the world do. Dean Baker is quoted in the Bloomberg article as saying that “U.S. policy makers should encourage international standards for disclosure through talks at forums such as meetings of the Group of 20 nations.” But you can be sure that any such encouragement would go nowhere, since all these central banks are independent and would start screaming about how their independence was being compromised if politicians started telling them what to do.

Besides, the Fed was hardly enthusiastic about releasing the information that we’ve seen so far.

Personally I think it’s vital that the public be able to see charts like this one, showing the degree to which individual banks were saved by central bank lending; the case for secrecy — which always for some reason includes the word “stigma” — is pretty weak. Has anybody ever tried to quantify this “stigma” effect? By all means put a two-year delay in before the lending is revealed. But letting the public know what you did during the course of a crisis two years ago is an important part of the accountability that any central bank has to the country or currency area as a whole. And if you think the Fed is bad on such matters, it’s worth reminding ourselves occasionally that every other central bank is significantly worse.


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