The financial landscape is shifting and changing, and the truth is, no one knows where it or the related exchange traded funds (ETFs) are going to wind up when all is said and done.
As efforts to make repairs are ongoing, one can’t help but wonder: where are the trillions of taxpayer dollars used to bailout financial institutions actually going?
As the Federal Reserve relaxed collateral requirements for new lending, it has distributed more than $1.1 trillion to faltering financial institutions and has refused to disclose the details on which institutions took out these loans, except for the $150 billion given to AIG, report Erik Holm and Stephanie Luke for Bloomberg. Why hide these transactions? The market has already plummeted and some believe that lack of transparency is one reason for this. After all, it is the taxpayers who are funding the plans to recover the failing economy, shouldn’t they know exactly how much and where every dollar is being allocated?
On one hand, regulators fear that if investors and traders find out which institutions took the loans, a frenzy of short-selling and additional runs on deposits could result, which was seen in the demise of Bear Stearns, Washington Mutual and Lehman Brothers. On the other hand, regulators state that disclosure of the Fed’s pricing methods is necessary to help alleviate the problems of a dangerously illiquid market, states Adrew Jeffrey at Minyanville Publishing & Multimedia, LLC.
No one wants to see the market take another huge hit. But, it would be just as devastating, if not worse, to hide the truth and have it come back to only haunt us. Only time will tell if the bailout and taxpayer dollars will help these institutions, their stock prices and indexes that track their sector rebound from a catastrophic year.