Who's Getting $2 Trillion In Fed Loans?

The $700 billion federal rescue plan for Wall Street continues to get headlines, but there's another massive effort to prop up financial institutions that's been falling under the radar so far.

The Federal Reserve Board has been quietly providing $2 trillion in "emergency" loans to banks, and the pace has been quickening, Early Show National Correspondent Jeff Glor reported Friday.

And, says Glor, the Fed has shown no interest in revealing which banks are getting the money, or what the banks are putting up in return, even though taxpayers are footing the bill.

The new loans were made possible when lending rules were relaxed in September.

"We're not accustomed to the Federal Reserve loaning money on such weak terms and in such large amounts to banks," observes economist Peter Morici.

At a congressional hearing Tuesday, Fed Chairman Ben Bernanke said, "Some have asked us to reveal the names of the banks that are borrowing, how much they're borrowing, what collateral they're posting. We think that's counterproductive.''

Economics teacher and former Wall Street bond trader Ann Lee has taken notice, saying she thinks we should be "very concerned" that the Fed is staying mum.

"The Fed is essentially saying, 'Trust us,' " Glor remarked. "Yes," Lee replied, and, "I think people are running short on trust these days."

The secrecy surrounding these loans has prompted Bloomberg News, the company founded by New York City Mayor Michael Bloomberg, to file a lawsuit seeking the release of the information.

"We feel that the American public has the right to know how their money is being spent," Bloomberg's Amanda Bennett told Glor.

He says Bloomberg disagrees with the Fed's claim that releasing the names of the borrowers would be "counterproductive" and could create a panic if people knew which banks need the money.

"There is a concern," Bernanke told the hearing, "that, if the name is put in the newspaper that such-and-such bank came to the Fed to borrow overnight for a perfectly good reason, that others might begin to worry, 'Is this bank creditworthy?' and that might create a stigma."

"We actually think it is the opposite," Bennett says, "that the lack of transparency is part of what's causing this financial panic."

"Though the government said transparency was essential for the $700 billion dollar bailout, the Fed loans are apparently a different story," Glor says.

But lawmakers such as Republican Congressman Scott Garrett of New Jersey say they shouldn't be. "This is not the government's money," Garrett told Glor. "This is the American taxpayers' dollars, so they should have a right to know where it's going."

The Fed didn't respond to requests from CBS News for an interview.

Some experts, Glor points out, feel this should be handled in the way national security information is -- without making the banks' names public, but with the formation of a congressional committee with oversight powers so, Glor says, "there's someone supervising the Fed, especially when we're talking about these massive sums of money."

The Fed usually doesn't name names of banks getting loans, Glor notes, so, in that sense, this is no different. However, he adds, "They've never made these many loans before, and under these loose standards."
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