Open the Spout

I read Liz Smith regularly. That’s about as close to celebrating our gossip culture as I come. Liz is now recuperating from a fall but keeps her gossip coming as she enters her 88th year. If she ever ends her column I won't replace her with TMZ. I’m the exception as the majority of Americans enjoy a good bit of gossip based on the huge interest in celebrity lives and goings on. It’s largely harmless.

Escapism is fine for subjects of entertainment, celebrity and fashion which are themselves less impactful than issues of war and economics. Gossip and rumor can be effectively used to grow specific types of businesses, especially clubs and restaurants that rely on the “hot” factor. Rumor and gossip can be very detrimental to the business world. There are competitive reasons and basic good management that dictates what information should be shared and what shouldn’t. I’m a great believer and practitioner of transparency where it’s appropriate. Insuring that employees know key pieces of information about their company generally yields a more engaged and effective staff who can then be focused on the job at hand.

Government has good reason to keep some information secret as well, but should be extremely judicious about what is secret. The essential function of public policy of governments is for the public interest which can only be served if that same public is informed of what is being done in its name. This week’s brouhaha with the latest Wikileaks disclosure of Classified Embassy Cables and listing of Key US interest sites has brought to the forefront the issue. Wikileaks isn’t the problem. The site is a mechanism for releasing data – the current equivalent of the newspaper a generation ago.

The Washington Post earlier this year ran a groundbreaking and fascinating series called Top Secret America that was the result of two years of investigative journalism that showed there is an entire economy and infrastructure around all things Classified. Many parts of this series are chilling – from the vast dollars and human resources that are allocated to covert activities to the thousands of government funded companies and agencies that often perform identical tasks with little to no accountability. I don’t recall anybody calling for the execution of the Post’s writers and editors as they are for Julian Assange.

Wikileaks has consumed the vast majority of the focus this week though there was another release of information that is far more revealing and will have much more of an impact on everyday Americans in the near and long term. The release of what diplomats really think of their counterparts has caused embarrassment and has required huge efforts by Secretary of State Clinton, but pale in comparison to the news from The Federal Reserve.

Congress almost passed the “Audit the Fed” bill sponsored by Representative Ron Paul for the past dozen or so years. Instead they folded in some of the conditions into the recently enacted Dodd-Frank financial reform bill. The result is that the U.S. Central Bank disclosed 21,000 transactions involving $3.3 trillion dollars.

The transactions show that millionaires and billionaires got financial aid directly from the Fed. It lists major U.S. corporations that got low-to-no-interest loans. In addition to the direct aid, banks worldwide tapped into the Federal Reserve’s emergency lending programs more than 4,200 times for a total of $3.8 trillion.

Going through the vast array of transactions one is struck that the Fed has transformed from being an obscure operation that set interest rates and handles monetary policy to its own policy making organization.

Federal Reserve Chairman Ben Bernanke has justified these actions by referring to the authority for the Fed to be a “lender of last resort.” Further, the Fed states that all of the loans are fully collateralized and that when repaid there may even be a profit.

It will be good news if there are few losses on the Fed’s actions. There’s a greater issue than whether the bailouts were justified (or legal)…though those are valid and important discussions that are not happening. The point is that the Fed is comprised of appointed individuals who have single-handedly injected trillions of dollars into the Global Economy without any oversight from Congress. The legislative and executive branches of government have epic political battles over funding. Just this week there was an agreement to extend unemployment benefits and continue certain tax breaks. It was a major battle of wills and politics. Without getting into the merits of that legislation, the point is that it was discussed and debated and is relatively paltry economically compared to what the Fed has been up to.

We know what the Fed has done only thanks to an Act of Congress – and a watered down one at that which took years to get passed. It’s time for Wikileaks to take on the Fed and open the spout.