Inner City Press/Community on the Move filed an administrative complaint against the Federal Reserve Sunday demanding information about a closed-door meeting held earlier this month with the Clearing Corp. (made up of all the top investment banks) where new rules were made for the $60 TRILLION credit default swaps market.
The Administrative Procedures Act (5 U.S.C. Section 553) and related laws require that when the government engaged in rule-making, it must provide notice to the public, and allow and weigh public comments.
The irony of ignoring the Administrative Procedure Act, created as a byproduct of FDR's New Deal legislation and passed after WWII shows Republican's true intentions and also brings us full-circle to the last major problems with the market.
In typical Bush Administration fashion, transparency laws meant to protect public interests have been ignored. By denying the public to provide input on the rules-making process or even have access to communications or details regarding the secret meeting, they are effectively hoping to repeat the Bear Stears bailout x 17, all in secrecy.
The meetings were held with more than a dozen companies led by investment bank Goldman Sachs Group Inc . The companies -- which account for the bulk of business in the $60 trillion market -- met to help set new rules for credit default swaps trading, including the establishment of a clearinghouse. Credit default swaps are privately negotiated transactions used by companies to hedge against default risks. Over the past decade, the market has grown exponentially, from about $1 trillion to $60 trillion.
Matthew Lee, referring to the Fed-led rescue of investment bank Bear Stearns by JPMorgan Chase & Co, said, "It was one thing to bail out Bear Stearns without any comments from the public. Now the Fed is trying to bail out or benefit 17 of the largest financial institutions behind closed doors."
Given the still unknown extent of the current credit crisis, the move to hold this secret meeting with the who's who of the credit mess with no disclosed details may reveal a deeper problem that the Administration wants to keep the public unaware of.
Also present at the meetings were representatives from derivatives and securities industry trade groups who were directed to make no public statements or disclosures about the talks, according to information obtained by Reuters.
"This close-down, top-heavy process is unacceptable and, Inner City Press hereby timely contends, is contrary to law," Lee wrote in the complaint.
The following companies attended:
Bank of America, N.A.
Deutsche Bank AG
Goldman, Sachs & Co.
Merrill Lynch & Co.
The Royal Bank of Scotland Group
Wachovia Bank, N.A.
BlueMountain Capital Management LLC
Citadel Investment Group LLC
The increase in this market from $1 trillion to $60 trillion under the Bush Administration with no effective oversight is a problem they solely created and cannot wish away.
The robber barons and Fed enablers have a better understanding of the situation we're in and are ignoring laws to keep the public from finding out. The problem is, with no details it leads an already-weary public to speculate the extent of the crisis and manipulation/distortion of facts by the culprits.
Regarding the broader context of secrecy among creditors, Elizabeth Dole, R-NC noted:
"While I do not question that the creation of these structured products has delivered measurable benefit to the American consumer by lowering borrowing costs, it is becoming clear that a lack of transparency in the pricing and trading of these instruments has contributed to the credit crisis."
Is there a taxpayer funded bail-out or other handouts in the works for all the greedy banks who got us into this mess?
Reuters: N.Y. Fed's private OTC actions under fire
A picture is worth 1,000 words
Inner City Press report