It’s easy to say that the Fed is a very secretive, mysterious institution. That has certainly been true historically, and in some respects remains true today. But in most of the ways that matter, the Fed is actually more transparent about what it decides to do, why, and how it carries those policies out than almost any other institution in government.
.. “Audit the Fed” legislation makes more sense when you view it not through the lens of transparency and disclosure, and more through the lens of strong disagreement with the policy choices the Fed has actually made over the last several years. The decision to keep interest rates near zero for the last seven years and buy trillions of securities have certainly been controversial, and it is perfectly fair game to argue that these policies have fueled new financial bubbles, risk inflation, or contribute to inequality.
But framing those appropriate debates as a simple fight over transparency and disclosure conflates policy disagreement with a general push for good government.
Against Transparency
In the context of the then-frenzied demand for financial reform, Brandeis called for “publicity”–the idea that “bankers when issuing securities … make public the commissions or profits they are receiving.”
This publicity was designed to serve two very different purposes. First, Brandeis thought that the numbers would shame bankers into offering terms that were more reasonable–a strategy that has been tried with executive compensation by the SEC, with the result not of shame, but jealousy, leading to even higher pay. Second, and more significantly, Brandeis believed that publicity would make the market function more efficiently.
But in 2000, first lady Hillary Clinton read an op-ed piece in The New York Times detailing the harm that the bill would do to lower-middle-class Americans. She began referring to “that awful bill”–lower case “b”–and took on the mission of stopping her husband from making it law. He apparently acquiesced, letting the bill die in a pocket veto.
Two years later, First Lady Clinton was Senator Clinton. And two years later, she had received over $140,000 in campaign contributions from credit-card and financial-services companies. Two years later, the bill came up for a vote. But by now Senator Clinton apparently saw things differently from how First Lady Clinton had seen them. In 2001, she voted for “that awful bill” twice. (In 2005, she switched her position again, opposing its final passage.)
.. This is the problem of attention-span. To understand something–an essay, an argument, a proof of innocence– requires a certain amount of attention. But on many issues, the average, or even rational, amount of attention given to understand many of these correlations, and their defamatory implications, is almost always less than the amount of time required.
.. Once we have named it, you will begin to see the attention-span problem everywhere, in public and private life.
.. Any effort to protect the accused against unjustified criticism was abandoned. Unfair complaints would have to be tolerated–as they would have to be in any similar context. The age of transparency is upon us. The need to protect the whistleblower is unquestionable–driving off even modest efforts to cushion the blows from a mistaken accusation.
Al Jazeera journalist’s appeal rejected as he denies quitting a hunger strike
Prosecution lawyers have told their defence team that they must pay a fee of $170,000 to facilitate viewing of the video evidence against the journalists, a demand the network describes as an affront to justice.
Banks Prevent Transparency on Derivatives
So why are the banks doing this? In short, they are trying to avoid other derivatives regulations that are unrelated to the push-out rule.
Specifically, the banks want to reduce the impact of new rules, also part of Dodd-Frank, that aim to improve pricing transparency in the derivatives markets.
.. One interpretation of all this is that Wall Street simply dislikes the transparency rules more than the idea of pushing out swaps.