Back in May, Marcy Wheeler and I met with Chris Dodd, and I asked him if he knew, as Chairman of the Senate Banking Committee, which banks the Fed was lending to. He said he’d find out and get back to me.  He finally did.  He asks the Fed why he shouldn’t know these things, they told him, and he sent me their response.  The letter is below the fold.

There’s an interesting historical note about why the Senate divides itself into committees. When the Senate first convened in 1785, the Senate found that it could not irritate and disappoint enough constituents fast enough on enough issues. So the Senate split iself up into committees and thus became able to vastly increase the number of people they aggravated with their self-serving bullshit.

All of this is a long-winded way of saying that while the full Senate sells us out on health care, Chris Dodd is getting ready to sell us out on bailouts, yet again. On Thursday, Fed Chairman Ben Bernanke’s nomination is coming up for a vote in the Banking Committee, which is chaired by Dodd. Dodd, while moderately progressive on health care and civil liberties, is simply horrid on Wall Street issues, and will probably be turned out of office by his constituents because it is so transparent that he just doesn’t understand the anger and pain of the people screwed by Goldman Sachs, etc. The crazy thing about the current moment is that, on accountability for the mess on Wall Street, some Senate Republicans are more populist and aggressive than Democrats (watch Jim Bunning just destroy Bernanke in his hearing).

Charlie Cook says that Dodd’s chance of holding onto his seat is fairly poor, despite the berry blue nature of Connecticut. So Dodd is trying some fake populism, with a credit card bill here and a meek banking regulatory bill there. People can see through this. The acid test on reform, and the one that Republicans will use in their ads against Dodd (and every Senate Democrat who votes yes on Bernanke), is that no one is getting fired for the mess they caused. Not one regulator. And while during the S&L crisis, over 1,000 white collar executives went to jail, this time, the criminals are writing the reform legislation.

Real populism would mean hearings and blame, mass firings of regulators, and actual oversight. Fake populism is what Dodd is doing. On Thursday, despite four holds on Bernanke’s nomination (three Republicans, one Democrat), Chris Dodd is going to make his personal contribution to the no accountability era by jamming Bernanke through his committee. These holds, you understand, are there because Bernanke has failed to create job growth, and is keeping Fed lending decisions secret. And it’s not like Bernanke is some great liberal; Bernanke wants to cut Social Security because it is, as he says in literally quoting Willie Sutton (a far inferior bank robber to the ones Bernanke regulates), where the money is. Bernanke is against a jobs bill, and he wants to close the deficit on the backs of poor, old people. He’s literally Pete Peterson’s wet dream of a Fed Chairman. And this is the guy Dodd is going to bat for. Of course, even if Bernanke gets through the committee, there’s no guarantee he’ll get through the full Senate. Dodd is just tossing the potato to another vulnerable incumbent, the oh-so-principled Harry Reid.

That’s why, back in May, when Marcy and I were able to sit down with Dodd, we wanted to know about the trillions of dollars of loans that the Federal Reserve pumpted into the banking system. We asked him if he knew who got this money, and he hemmed and hawed about the Fed’s independence, but finally committed to asking the Fed. Zero Hedge took our video, and mocked Dodd for not knowing the difference between the various classes of institutions that we bailed out. But we wanted an answer, and Dodd said he’d get one.

And finally, here it is. The letter I got from Dodd is below. Basically, he says that the Fed told him they don’t want to release the names of the banks who borrowed from them because then banks will be reluctant to borrow from them again. And he’s not going to follow up with the Fed, because they already said they aren’t going to tell him, and that is apparently enough for him. The kicker, though, was the ending.

As Chairman of the Banking Committee I understand how important it is that the central bank, as the lender of last resort, be able to add liquidity to the market so that small businesses can meet payroll, people can get car loans and families can send their kids to college. In the current economic climate, we cannot afford to create disincentives for financial institutions to lend. But that does not mean that we give the Federal Reserve carte blanche and I will continue to look for responsible opportunities to increase transparency at the Federal Reserve.

Several of the holds on Bernanke are due to Bernanke’s secretive use of Fed funds to prop up banks. His confirmation hearing literally is the responsible opportunity to “increase transparency” at the Federal Reserve.

And Dodd, rather than embracing transparency, is fighting for secrecy and bailouts. Maybe that’s why he’s losing back home.  Maybe he thinks nobody will notice, or perhaps he’s just covered for the banks so long that he does it without thinking. I can’t say. But it still is possible for other members of the committee to vote “no” on Bernanke, and report out a narrow vote to the full Senate floor.

Someone has to deliver a wake-up call to Obama that he isn’t going to be getting his bailouts forever in return for a junk insurance bill. Fortunately, there are other members on the committee. Liberal Sherrod Brown and Jeff Merkley may vote “no,” since they ostensibly care about the working people who have had their pension funds eviscerated by Bernanke’s poor work as Fed chair. Michael Bennet is vulnerable and has shown some courage, so he’s a possible no vote. Jack Reed can be progressive and is very knowledgeable on financial issues, and Jon Tester might have some dim memory in his head of once representing the people who elected him. The rest of the committee who could move their vote is listed below.

Let them know you don’t like Bernanke and want a no vote. There aren’t that many calls on this guy outstanding, so you could make the difference.

Christopher J. Dodd Chairman (D-CT), (202) 224-2823
Richard C. Shelby Ranking Member (R-AL), (202) 224-5744
Robert F. Bennett (R-UT), (202) 224-5444
Jack Reed (D-RI), (202) 224-4642
Mike Crapo (R-ID), (202) 224-6142
Bob Corker (R-TN), (202)-224-3344
Robert Menendez (D-NJ), (202)-224-4744
Daniel K. Akaka (D-HI), (202) 224-6361
Sherrod Brown (D-OH), (202) 224-2315
Mike Johanns (R-NE), (202) 224-4224
Jon Tester (D-MT), (202) 224-2644
Kay Bailey Hutchison (R-TX), (202)-224-5922
Herb Kohl (D-WI), (202) 224-5653
Jeff Merkley (D-OR), (202) 224-3753
Michael Bennet (D-CO),  (303) 455-7600

September 17, 2009

Jane-

Thanks for taking the time to sit down with me earlier this year. I appreciate the good work that you do.

You and I agree that there must be greater transparency and accountability at the Federal Reserve. That is why I pushed to add a requirement to the financial rescue package requiring the Fed to report on the use of its emergency lending authority. It is also why I offered an amendment to the budget resolution requiring the Fed to publish information on the loans that it makes, and why I supported giving GAO greater ability to look into some of the institutions receiving federal emergency assistance. I am also reviewing the scope of the Fed’s emergency lending authority, as well as ways to increase transparency of the Federal Reserve’s actions, as part of our efforts to modernize the regulation of the financial sector.

After our conversation I followed up with the Federal Reserve on the question of sharing the names of banks who are receiving funds. They expressed great concern that making these banks public might discourage companies who need funds from participating in the program, and shared the following with us:

“The Federal Reserve does not release specific information regarding the borrowings of individual institutions from our lending facilities. This approach is completely consistent with the long-standing practice of central banks and is well-founded in terms of its rationale. The efficacy of central bank lending in stabilizing financial market conditions is critically dependent on the willingness of financial institutions and others to borrow from the central bank during periods of financial strains. If financial institutions are not willing to borrow from the central bank, the necessary liquidity will not flow into the market, and the absence of adequate liquidity can lead to a cumulative contraction in financial markets and a collapse of financial institutions, with severe adverse consequences for the economy. And, more specifically, if financial institutions believe that knowledge of their borrowing from the central bank might become public, they would likely become concerned that counterparties and market analysts might suspect that they are having financial difficulties and that the institution’s access to market funding could evaporate. In these circumstances, financial institutions may seek to minimize the risk that they will need to borrow from the central bank by reducing their lending and conserving liquidity. Clearly, such attempts by individual institutions can lead to a marked reduction in overall market functioning and credit availability. For this reason, publishing the names or any other data pertaining to the borrowing of an individual institution from the central bank would be quite counterproductive, and, accordingly, no major central bank publishes the names of borrowers from its standing facilities.”

As Chairman of the Banking Committee I understand how important it is that the central bank, as the lender of last resort, be able to add liquidity to the market so that small businesses can meet payroll, people can get car loans and families can send their kids to college. In the current economic climate, we cannot afford to create disincentives for financial institutions to lend. But that does not mean that we give the Federal Reserve carte blanche and I will continue to look for responsible opportunities to increase transparency at the Federal Reserve.

CHRISTOPHER J. DODD U.S. SENATOR