Friday, April 1, 2011

Fed's release of credit crisis loan data confirms FDR Framework works

Recently, under a Freedom of Information Act request by Bloomberg, the Fed released thousands of pages documenting the loans that it made during the credit crisis.

One of the fundamental reasons why the FDR Framework for financial markets actually works is that regardless of how much data or the ease with which the data can be analyzed, there are market participants who will analyze this data and turn it into information.

As Yves Smith observed in a post on NakedCapitalism,
A further remark: the fact that Bloomberg can say anything intelligent at this juncture is a testament to the cleverness of its reporters. The central bank quite deliberately responded to the request by providing the information in the most disaggregated, difficult to work with form imaginable. 
The central bank did a version of the same trick with its data on Maiden Lane II. The holdings of that asset management vehicle were various real estate exposures, some of which were hedged. The hedges were reported separately from the bonds and loans. Clearly, Blackrock, the asset manager, had far more useful and understandable reports that they used internally and provided to the New York Fed, but those were withheld. 
This [loan] data will presumably be as enticing as the Wikileaks cables, so enough eyeballs on it will eventually overcome the Fed’s efforts to hinder analysis
Given the voluminous amount of information provided, future FOIA requests may need to explicitly include that the relevant government body provide information in the form in which it is used internally, including any higher level aggregations, to prevent future “fuck yous” in the form of technically permissible but nevertheless obstructionist compliance.

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