Two weeks ago, Zero Hedge reported an exclusive story corroborated by at least two independent sources, in which we informed our readers that members of the Dallas Federal Reserve had met with bank lenders with distressed loan exposure to the US oil and gas sector and, after parsing through the complete bank books, had advised banks to i) not urge creditor counterparties into default, ii) urge asset sales instead, and iii) ultimately suspend mark to market in various instances.
The Dallas Fed took the opportunity to respond (on Twitter), when in a tersely worded statement it said the following:
We thanked the Fed for answering even if its response was in itself a lie, and further since we fully stood by our story, we asked the Federal Reserve chaired by Goldman Sachs veteran, Robert Kaplan, to answer several follow up questions regarding this matter which is of significant public interest. To wit:
- Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, met with U.S. bank and other lender management teams in recent weeks/months and if so what was the purpose of such meetings?
- Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, requested that banks and other lenders present their internal energy loan books and loan marks for Fed inspection in recent weeks/months?
- Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, discussed options facing financial lenders, and other creditors, who have distressed credit exposure including but not limited to:
- avoiding defaults on distressed debtor counterparties?
- encouraging asset sales for distressed debtor counterparties?
- advising banks to avoid the proper marking of loan exposure to market?
- advising banks to mark loan exposure to a model framework, one created either by the creditors themselves or one presented by members of the Federal Reserve network?
- avoiding the presentation of public filings with loan exposure marked to market values of counterparty debt?
- Was the Dallas Fed, or any other members and individuals of the Federal Reserve System, consulted before the January 15, 2016 Citigroup Q4 earnings call during which the bank refused to disclose to the public the full extent of its reserves related to its oil and gas loan exposure, as quoted from CFO John Gerspach:
"while we are taking what we believe to be the appropriate reserves for that, I'm just not prepared to give you a specific number right now as far as the amount of reserves that we have on that particular book of business. That's just not something that we've traditionally done in the past."
- Furthermore, if the Dallas Fed, or any other members and individuals of the Federal Reserve system, were not consulted when Citigroup made the decision to withhold such relevant information on potential energy loan losses, does the Federal Reserve System believe that Citigroup is in compliance with its public disclosure requirements by withholding such information from its shareholders and the public?
- If the Dallas Fed does not issue "such" guidance to banks, then what precisely guidance does the Dallas Fed issue to banks?
We assumed (correctly) there would be no Twitter, or any other unofficial response to this list of questions, which is why two weeks ago we, in collaboration with several readers (due to obvious reverse FOIA purposes), also requested an official response from the Fed through a Freedom Of Information Act submission. Surely if the Fed would go so far as to call us liars, it would have no problem either responding or providing the required information.
This is what we got back.
We appreciate the "response."
With regard to  and , we find it disturbing that the Dallas Fed not only does not keep internal logs of who visits the Fed (or whom the Fed visits), but especially that there is no internal log of whom the President meets with as part of ordinary course of business.
This is troubling when one considers that as part of its routine disclosures, the NY Fed not only keeps a detailed log of the President's daily schedules but also makes them publicly available each quarter (link to the most recent one). One wonders how the Board, and the president, holds itself "reasonably" accountable to the public if there is no internal record at all of any in house meetings, which clearly become a relevant topic in issues such as this.
As for , we will gladly readdress the question in the proper semantic protocol, and will follow back with another FOIA requesting the explicit financial records of bank energy loan books which the Fed has collected as part of its recent diligence efforts to uncover which banks are underreserved, the same diligence that prompted the Fed to pursue the procedure that prompted our article in the first place, a procedure which the Dallas Fed alleges "there is no truth" to.
We look forward to discovering what excuse the Dallas Fed will provide to not supply the requested information in that particular FOIA request.