Having your own blog can be lot's of fun. I especially enjoy the spirited debates with some of my readers (from whom I have already learned a lot from).
I had a recent exchange with "Pointbite" where I challenged the sanity of Ron (Conspiracy Theory) Paul. The debate, however, was strangely aborted. I thought that Pointbite had given up. I realize now that there must have been a technical glitch that prevented him/her from posting a response. Happily (for me, at least), I accidently came across Pointbite's rebuttal
here.
I think that Pointbite asks some good questions. I'm planning another post on the subject. But for now, let me briefly try to clear a few things up.
First, I am not saying that the Fed should never be audited. And I am not saying that the Fed should keep all things secret forever. What I am suggesting is that there are some types of information that should not be disclosed during a financial crisis. The identity of those banks making use of the discount window or emergency lending facilities is an example of such information that should probably not be disclosed; at least, not until the crisis has passed. Likewise, the terms of the lending arrangements should not be disclosed; again, until well after the crisis is passed.
The rationale for such a policy, whether it ultimately proves correct or not, is at least a plausible one for now. Releasing such information during a crisis is likely to lead to a run on the banks involved; exacerbating the crisis. Moreover, because of the stigma associated with using the window, disclosure of such information would prevent banks from participating. The rationale for encouraging participation, of course, assumes that it is socially desirable. This is debatable, for sure. But it is precisely this that should be debated. Gratuitous attacks on the Fed, like those served by Ron Paul, are absolutely of no help here (although he will find them useful for political reasons).
Some other things of note. The Fed has evidently never released information relating to its discount window lending. On routine lending as the normal term is very short (typically overnight, to healthy institutions, fully secured), I fail to see any purpose from disclosure at any time but if the lag were long enough, no real harm either -- just the burden/cost of publicly disclosing something that no one will much care about.
The
Section 13(3) special facilities is a different matter from routine discount window lending. This section has not been used for such a long time that I don't think the Fed has any clear policy concerning the release of information here (except that it shall not be released during a financial crisis). I believe that such information should eventually be released, and Bernanke has evidently suggested as much in his testimony to Congress.
