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Texas Representative Ron Paul isn’t too busy launching his presidential bid to take care of his current duties as chairman of the Domestic Monetary Policy and Technology Subcommittee. The congressional subcommittee invited the general counsel of the Fed and New York Fed to testify Wednesday in a hearing entitled “Federal Reserve Lending Disclosure: FOIA, Dodd-Frank, and the Data Dump.” The Congressmen asked Scott Alvarez, general counsel of the Federal Reserve System, and Thomas Baxter, GC of Federal Reserve Bank of New York, about the Fed’s lending practices during the recent financial crisis and thereafter. Paul said one of his “big beefs” with the Federal Reserve is that the central bank wields so much financial power. The Congressman criticized the Fed for its reluctance to disclose to the public when banks are unhealthy. Paul said the Fed’s practices of protecting banks’ privacy appears to be at odds with the U.S. Securities and Exchange Commission, which is pushing companies to reveal more information. If the Federal Reserve knows that a bank is in trouble, Paul said, “The more information that’s made public, the better.” Alvarez defended the Fed’s practices as crucial for preventing market disruption. In particular, its two-year delay in disclosing the names of borrowers that have accessed the discount window prevents a chilling effect on the system. Because the discount window is used by healthy and troubled banks alike, Alvarez said the two-year lag prevents the information from getting to the public-which might not understand the method-until the banks have the chance to explain their move. But Paul said even the Fed’s response to a Freedom of Information Act request asking for documents, covering use of the discount window from August 2007 to March 2010 was too vague. Part of that request included information about “single-tranche open market operations,” a program that made low-interest loans to major firms such as Goldman Sachs. Paul said the loans were “essentially a free loan to these politically well-connected firms.” Data about the program were released in chart form with 81 percent of the content redacted. “Is it really compliance with FOIA when we don’t know what’s been excluded?”, asked Paul. Alvarez defended the Fed’s redactions, contending that it had nothing to hide. “The information that is redacted is simply information that is not responsive to the FOIA request,” he said. When it comes to disclosure, Alvarez maintained that the Fed in the United States is one of the most-if not the most-transparent central banks in the world. Many other countries’ central banks do not announce their policy decisions or votes, said Alvarez. The Federal Reserve provides minutes of its meetings three weeks after they’re held and entire transcripts five years later. Paul had the last word. “We’re in a financial mess,” he said. “And just printing all this money isn’t doing any good.” Both Alvarez and Baxter will be responding to follow-up written questions from the subcommittee.

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