What Exactly Did the Fed Do with $2 Trillion?

by Dean Baker

To combat the financial crisis set off by the collapse of the housing bubble, the Federal Reserve Board [1] has lent out more than $2tn through various special lending facilities. While the Fed discloses aggregate information on the loans made through each of the facilities, it will not disclose how much money it lent to specific banks or under what terms. By contrast, the Treasury puts this information about its $700bn TARP bailout [2] up on its website [3].

Partly in response to this huge increase in the Fed's power (its secret lending is equal to two-thirds of the federal budget), more than 270 representatives in Congress have co-sponsored a bill that would have the Government Accountability Office audit the Fed. In principle, this audit would examine the Fed's loans and report back to the relevant congressional committees, which could decide to make this information public.

Most people might consider it perfectly reasonable to have Congress's auditing arm review what the Fed has done with $2tn of the taxpayers' money to ensure that everything is proper. After all, we wouldn't let other government agencies spend one millionth of this amount ($2m) without some sort of record that could be verified.