Fed Considering More Disclosure on Emergency Lending Programs

By Craig Torres

April 15 (Bloomberg) -- Federal Reserve officials are considering steps to provide the public with more information about emergency programs aimed at reviving credit and ending the U.S. recession.

The central bank will probably increase disclosure on the collateral it holds against loans to financial firms, while also weighing a full range of options, including possible press conferences, according to people familiar with the matter.

Chairman Ben S. Bernanke has asked an internal committee headed by Vice Chairman Donald Kohn to review ways the central bank can boost transparency after it extended its lender-of-last resort role far beyond banks and doubled its balance sheet to more than $2 trillion to stem the credit crisis.

The committee will probably recommend that the central bank reveal credit ratings on collateral it holds in a program supporting American International Group Inc., the people said. The panel will also suggest more disclosure about the mortgages and related securities the central bank took on while orchestrating the merger of Bear Stearns Cos. with JPMorgan Chase & Co.

The U.S. Senate in a nonbinding April 2 amendment urged the Fed to release details on loan collateral at least every month. It also called on the central bank to provide the number of borrowers and say whether loans accepted in the bailouts of Bear Stearns and AIG have recorded losses that won’t be recovered.

The bill, which passed 96-2, wasn’t as tough as another amendment that passed 59-39 calling on the central bank to release details on the companies that received Fed loans.

Greater Openness

Bernanke, a former economics professor at Princeton University, has published research on central bank transparency and pushed for greater openness at the Fed.

The central bank has considered holding press conferences since Bernanke initiated a review of communication with the public shortly after becoming chairman in 2006.

Bernanke appeared last month in his first televised interview since becoming Fed chairman, saying the biggest risk to an economic recovery is a shortage of “political will.” He has also written newspaper columns and lengthened the normal question and answer periods after some of his speeches.

“One of the admirable features of Ben Bernanke is that he has laid out the rationale for the various steps the Fed has taken and has done it in an effective way,” Lawrence Summers, director of the White House National Economic Council, said in an April 14 interview with Bloomberg Television.

Bernanke said in testimony to the House Financial Services Committee in February that he initiated a review of the information the central bank provides the public. The unprecedented expansion of the Fed’s balance sheet has prompted concern that the central bank is encouraging excessive risk taking and distorting pricing in financial markets.

Bernanke’s term as chairman expires in January 2010.

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net.