Cracking the Federal Reserve Bank's Secrecy

The Federal Reserve Bank is the country's central bank that sets the pace for nearly all other banks in the country. Like little ducks the other banks follow the policies, interest rates and economic strategies of the Federal Reserve Bank. However, some are beginning to question why the central reserve bank isn't more transparent as other developed countries and whether or not this lack of transparency will affect the economy.

The transparency is creating some problems for investors and banks who want more information and understanding of the internal workings of the government in order to effectively manage their portfolios. Government officials are somewhat unsure of offering more exposure but may consider cosmetic changes in the near future.

Chuck Lieberman, who as a former New York Federal economist who now is the chief investment officer of Advisors Capital Management LLC states, " It's one less degree of freedom," that the federal government is secretive with its economic policy. He also believes because of this lack of transparency "The very act of providing some assurance might scare the market". Therefore, the government stays mute in order to not panic people when crisis hits but this isn't in the best interest of everyone.

As an example the lending market recently went through a major stock sell-off that hasn't been experienced since 2003. While banks and investors were looking towards the Federal Reserve Bank for direction the government stayed mute. This may have perpetuated a problem that wasn't necessary and didn't need to be so profound.

The U.S. Federal Bank is much less open with information than central banks in Europe, Japan and the U.K. Such foreign banks hold press conferences and conduct interviews. The U.S central banks just stay quiet. Therefore they take a hands off approach to the effects of their policies on the U.S. economic market. When crisis hits their policy of secretiveness may actually hamper more than help the country.

One of the potential solutions according to Kansas City Federal Reserve Bank President Thomas Hoenig is "advancing how we use the minutes" of Federal meetings. Most investors and banking leaders believe that this solution falls seriously short of what is needed. Simply knowing the general topics of Federal meetings is a waste of everyone's time. Banks and investors need to know more about what is going on.

Currently there isn't a captain at the help of the U.S.'s economic ship. At least no one has seen the captain because he isn't willing to come out of the plushy accommodations on the bridge. Forcing the Federal government to be more honest and open when crisis happens, allowing them to be questioned on economic policy and giving wide publicity to their decisions helps all bankers and investors make their own decisions which helps the market grow.