Bloomberg vs. The Fed: What It Means for CDs, Savings Accounts, and Mortgages
January 12, 2010
Possibly the most underreported massively important financial news story occurring today pertains to the freedom of information lawsuit Bloomberg News Service has brought against the Federal Reserve.
The outcome of this case, which is currently in the U.S. appeals court, could have tremendous implications for certain banks, as well as the investors who hold CDs, money market accounts, and savings accounts at those certain banks, as well as people who have mortgages at those certain banks.
The argument from Bloomberg is that the Federal Reserve should reveal which banks and financial institutions would have failed if the Federal Reserve had not begun, in 2008, lending money to any financial firm that needed it, at low interest rates and with decidedly suspect collateral.
The Federal Reserve has been fighting hard to keep that information secret. The total amount the Fed has lent under this program is $2.14 trillion.
Yes, $21.4 trillion, with a "T," and yes, in pretty much total secrecy.
The temptation may be, for conservative investors who have saved money for years, to call for the "who got the money" information to be released.
However, the Federal Reserve is probably correct that the results of such disclosure could be utterly disastrous: namely, the classic "run on the bank"--a dire scenario that would obviously be very troublesome for any deposit account customer associated with an exposed bank.
It would be interesting to hear what Money-Rates.comvistors, some of the most faithful savers around, think of this matter.
