A Member's Question

I received an email from a member asking my opinion of the Supreme Court decision that will force the Fed to hand over hundreds of pages of information sought by Bloomberg under the Freedom of Information Act regarding borrowing from the Fed by banks. Here's my reply and initial thoughts....

Whats your take on the supreme court ruling and do you think it hints at “NO QE3”?

"One, I'm not sure how Mark Pittman died, but if you do some research on Fed whistle blowers, you'll find some uncanny suicides, etc throughout their history. That' just a side note. 

Back in 2008/2009 there was a real stigma from borrowing from the Fed discount window, they set up some private facility (I guess that's what this is about) so banks could borrow without the stigma from the market. This much further down the road, I see no reason that the banks would object some vehemently to the release. There's got to be something in there that is very damaging beyond opinions that will be drawn based on what the banks "did", the market is forward looking, it doesn't care much about what happened so there' something there.

As far as QE, that's tough, if for no other reason then Congress itself and the debt. That's why I call it a Chinese Finger Trap. They (Congress) have figured they can spend and spend and the Fed will just continue printing. I think the issue of default on our debt will take precedence as far as Congress is concerned. Bernanke will scare the hell out of them about what will happen if we default so I think some form of QE will continue, but it may not look or behave like what we've seen in the past.

The real question is whether there will be a grassroots campaign led by the Paul Family that does some real damage to the Fed's autonomy. People in the US are getting Fed up, seeing what the banks got and thinking about what they've lost may very well create a Fed backlash. So it may be that the banks were actually a proxy acting in the interest of the Fed, unless like I said, there's some ongoing events that will severely damage the banks and cast doubt on the banking system causing banks runs or something like that.