The Federal Reserve has passed with flying colours and failed spectacularly a test on the same subject in just seven days.A week ago, America's central bank announced that Ben Bernanke, its chairman, will hold four press conferences a year, starting next month. An 'A', then, for transparency.
On Thursday, the Fed disclosed 25,000 pages of documents revealing the banks that came to it with their begging bowls during the crisis. Again an A grade, but not for the Fed. It goes, instead, to Bloomberg, the news organisation that harried the bank through the courts to force the data dump.
It's the failure that has generated far more interest. The Fed resisted disclosing the who, what, when of the loans it made through its discount window (please excuse the jargon) on the grounds that investors might now start to get worried about the health of those lenders who tapped on the window the loudest.
The Clearing House Association, the biggest financial lobby group in the US, also joined in the legal fight in a clear sign that the banks really wanted this kept under wraps. In fairness, when the banks borrowed they did so in the understanding it was confidential.
And it's hard to overstate the stigma attached to using the window, the oldest lending tool the Fed has. In the early 1990s, as America's banks were recovering from the Savings & Loans crisis, they would rather pay more to borrow from each other than turn to the window for cheaper money. (read more)
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