Bernanke Rips Media Sources for Condemning Fed
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UPDATED: Dec 8, 2011
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Ben Bernanke, chairman of the Federal Reserve, responded with a letter to the House and Senate Banking Committee in defense of the Fed after media sources reported on the Fed’s alleged “secret loans” last week.
This letter not only defends the Fed, but launches a full scale counter-attack against specific articles, claiming the articles “contained a variety of egregious errors and mistakes.” Bernanke pulled out direct quotes from a specific media source’s story, and made it very apparent who he was attacking: Bloomberg.
The article in question was released last week, and claimed the Fed issued “secret” loans to large banks, totaling over $7.7 trillion. Readers held a deep disapproving tone as their condemning comments filled over 33 pages.
But Bernanke denies claims that any loans issued by the Fed were ever “secret.”
“All of the programs were publically announced when they were initiated, and information about all lending under the programs was publically released—both on a weekly basis through the Federal Reserve’s public balance sheet release and through monthly reports to Congress, both of which were also posted on the Federal Reserve’s website,” wrote Bernanke in his letter.
The chairman also tackled the statistic of the Fed’s loans totaling $7.7 trillion. According to Bernanke, that number is “wildly inaccurate,” as the total credit outstanding “was never more than about $1.5 trillion”—effectively saying the article’s statistic was exaggerated by over 80 percent.
His letter also defended the necessity for the origination of these loans, claiming they were “a necessary response to ensure that the crucial mistake made during the Great Depression—failing to prevent the collapse of the financial system—was not repeated.”
This retaliatory letter ended by citing a direct quote from the Bloomberg article, saying it “incorrectly asserted that banks ‘reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates.’” Bernanke said banks didn’t the make the profit that the article claimed, saying “most of the Fed’s lending facilities were priced at a penalty over normal market rates so that borrowers had economic incentives to exit the facilities as market conditions normalized, and the rates that the Fed charged on its lending programs did not provide a subsidy to borrowers.”