Washington, DC - A freshman congressman has elevated the stakes in an ongoing fight between Congress and the Federal Reserve over transparency in the massive bailout of the financial sector.

    Ask most people on the street how much money taxpayers are using to save banks and you will probably hear the number $700 billion. The Troubled Asset Relief Program (TARP) passed by Congress at the urging of the Bush administration and then Treasury secretary Henry Paulson, allocated an unprecedented sum of taxpayer money for the sole purpose of propping up the financial sector in its darkest hour.

    But the actual number is much bigger. The current block of taxpayer money that has been pledged by the US government and the Federal Reserve to prevent the system from collapsing, according to an analysis by Bloomberg News, is roughly $12.8 trillion as of March 31. This money has been lent, spent or guaranteed to prevent a systemic collapse. The Bloomberg report and a chart showing broad categories of where the money has come from and the programs it funds can be found here.

    Critics have pointed out that the Federal Reserve, the public-private partnership that controls the supply of dollars on the world stage and in the United States, controls the majority of this emergency money - $7.765 trillion - and is being secretive about where the money is going.

    In an interview with Truthout, Rep. Alan Grayson (D-Florida), said the Federal Reserve is practicing "Enron accounting," and has "socialized Wall Street's bad bets."

    A lawyer with years of experience battling corruption on behalf of taxpayers and whistleblowers, Representative Grayson began a crusade to follow the bailout money after taking office in January 2009. As a member of the powerful House Financial Services Committee, Representative Grayson has been challenging bank executives and members of the Federal Reserve to disclose the terms of the massive hidden deals.

    "The Federal Reserve likes to bill itself as an independent agency but what it really is is an agency that is entirely dependent on banks. When you look and see how it is structured, you see that Wall Street runs the show. This is something that people on the political right have been complaining about for decades. Everybody's worst nightmares are now taking place because we are seeing the transfer of literally trillions of dollars of wealth from the taxpayer to the bad banks," Grayson said.

    Regarded by many as the most powerful institution in the world, the Federal Reserve operates in concert with the US government, but is not under public control. Set up to be free from political influence, the seven-member Federal Reserve board of governors are appointed by the president and confirmed by the Senate for a single 14-year term. Because the Federal Reserve system is a collaboration between public and private entities, the actions the 12 regional banks take can be hidden from public view.

    The Federal Reserve has stepped in as the "lender of last resort," bailing out financial firms by lending them billions of dollars, directly purchasing their so-called "toxic assets" and guaranteeing or insuring some of the piles of risky assets. These actions have absorbed much of the risk for banks and financial institutions on behalf of the US taxpayer. Institutions such as American International Group (A.I.G.), Citigroup, Bear Sterns, Bank of America, and others have been thrown a lifeline by the Federal Reserve.

    The balance sheet of the Federal Reserve has more than doubled as a result of its emergency lending and buying, and currently stands at $2.06 trillion as of May 6. But the transactions which do not appear on the Federal Reserve's balance sheet are deeply concerning to Representative Grayson.

    In a February 11 hearing, Representative Grayson grilled Vikram Pandit, the CEO of Citigroup, and took the Federal Reserve to task for what he called a "heads I win, tails you loose" deal, under which the Federal Reserve agreed to absorb most of the possible losses on a $300 billion pile of the Citi's "toxic" mortgaged-backed securities. Citi's Pandit called the deal "insurance."

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    "In the [Citigroup deal] there are billions upon billions of dollars of income on these assets even after they go bad because they [the underlying mortgages] don't all go bad. So these assets produce billions of dollars of income every year and Citigroup gets to keep the income as well as the appreciation on the assets and the government just takes the losses," Representative Grayson told Truthout.

    The Citigroup deal was made public because it involved other government agencies including the US Treasury. According to Bloomberg and Representative Grayson, the Federal Reserve has been engaging in transactions which it has kept off of its publicly available balance sheet.

    "The strange thing about this is that only two trillion of this activity has turned up on the Federal Reserve's balance sheet. In the case of the Citibank deal, it is on Citibank's balance sheet and off the Federal Reserve's balance sheet, which makes no sense whatsoever," Grayson said, adding "The Federal Reserve has adopted Enron book-keeping procedures at this point."

    The off-balance sheet activities of the Federal Reserve may have helped sick banks clear out their books and pass the so-called bank "stress test," according to Grayson.

    "Essentially what the Fed has done is to change Uncle Sam into Uncle Sap. We have become the saps for Wall Street," Grayson said.

    Representative Grayson told Truthout that the Federal Reserve has not been responsive to requests for information from his office. He suggested that Congress may need to use its subpoena power to pry loose more information about where the money is going and what the Federal Reserve is taking as collateral to back up their loans.

    Bloomberg News is suing the Federal Reserve for this and other information under the Freedom of Information Act (FOIA).

    In a May 6 hearing, Representative Grayson asked Elizabeth Coleman, the Federal Reserve inspector general - the institution's internal watchdog - if she was monitoring the institution's bailout activities. In her response, Coleman made clear that she does not believe she has oversight authority over the actions of the individual Federal Reserve banks, instead she only has authority to inspect the activities of the Federal Reserve board of governors.

    Under questioning, Coleman said that the Federal Reserve office of the inspector general was not aware of the Federal Reserve's specific bailout activities.

    Representative Grayson: "Do you know who received that $1 trillion plus that the Fed extended and put on its balance sheet since last September [2008]?"

    Elizabeth Coleman: "I do not know, we have not looked at that specific area."

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    Representative Grayson: "Have you done any investigation or auditing of off-balance sheet transactions conducted by the Federal Reserve?"

    Elizabeth Coleman: "At this point, we are conducting our lending facilities project at a fairly high level and have not gotten to a specific level of detail to be in a position to respond to your question."

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    Federal Reserve officials have said that releasing the names of the companies which have borrowed billions of dollars would signal weakness to the market and could cause a run on the banks.

    Famed former Senate Foreign Relations Subcommittee investigator and international finance expert Jack Blum told Truthout that this fear has some merit.

    "The Federal Reserve takes the attitude that their job is to protect the banking system. You can't step out and start telling people which banks are troubled and where the crisis is because the consequence of that will be to have everybody desert the bank. That is the thorny problem that has led the Federal Reserve to keep quiet what they are doing. That has a degree of legitimacy," Blum said.

    But this situation cannot last forever, according to Blum.

    "The question is how far do you let them carry it. At what point, when everybody now knows how screwed up things are, once you've gotten past the point where you've guaranteed everything, how much longer do you have to maintain secrecy to protect the institution?"

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