Fed Won't Say Where $2T in Loans Went

Money is in addition to $700B Wall St. bailout; collateral unclear, too

By Harry Kimball, Newser Staff

Posted Nov 10, 2008 12:54 PM CST

(Newser) – The Federal Reserve has lent more than $2 trillion to financial institutions under programs without congressional oversight—and will not disclose to whom or under what terms, Bloomberg reports. The loans are separate from the $700 billion congressionally approved bailout package. Investors and citizens are concerned that the collateral given in these unregulated programs could be improperly valued.

The $700 billion, designed to relieve banks of toxic debt, has been used to buy safe, top-rated shares. Meanwhile, more than half of the $2 trillion in the other programs has left Fed coffers since mid-September, raising eyebrows. Banks and officials said revealing to whom and for what the Fed lends could unfairly influence financial solvency.

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Senate Banking Committee Chairman Sen. Christopher Dodd and Sen. Richard Shelby question Bernanke and Paulson. (AP Photo)

US Federal Reserve Chairman Ben Bernanke is seen during the opening of the G-20 Finance Ministers and Central Bank Governors meeting in Sao Paulo. (AP Photo)

Federal Reserve Chairman Ben Bernanke, left, and Treasury Secretary Henry Paulson. (AP Photo)

Federal Reserve Chairman Ben Bernanke. (AP Photo)

The Federal Reserve building in Washington. (AP Photo)

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Taxpayers have a right to know where their tax dollars are going, but one piece of information standing alone could undermine public confidence in the system. - Scott Talbott, Financial Services Roundtable

The collateral is not being adequately disclosed, and that's a big problem. In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin. - Dan Fuss, Loomis Sayles & Co.

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Fed Won't Say Where $2T in Loans Went