Recently Bloomberg posted this witty story (see below) about new standards of central bankign adopted by Fed. I laughed-cried, when I read it. But once you think it over, it becomes scary. Enjoy.

Commentary by Michael Lewis

April 13 (Bloomberg) — Last week the Federal Reserve

bravely released 894 PDF files containing 29,346 pages that

detailed its heroic actions during the financial crisis.

These documents revealed how open-minded the Fed can be

when it needs to be. Local governments in Belgium, Japanese

fishing cooperatives, the Libyan government and many other

unlikely parties received the Fed’s financial aid. Failing U.S.

banks, such as Citigroup and Morgan Stanley, were of course

handed whatever they wanted, and permitted to post as collateral

pretty much anything they could get their hands on: junk bonds,

defaulted debt, volatile equities.

To naive critics this came as just more evidence that the

Fed had mistaken the wants of a handful of rich people for the

needs of the wider society.

Many Fed spokesmen have wisely declined to comment, many


Upon seeing how incapable the public is of understanding

its wisdom, the Fed judiciously elected to withhold a second,

far longer document. This previously unexamined collection of

10,427 encrypted PDF files should no doubt offer not merely a

record of financial heroism, but a snapshot of peerless

financial leadership during a crisis.

‘American Public’

Unfortunately, it won’t.

“We decided not to release any more details,” said one

Fed spokesman, “because frankly, the American public is too

stupid to understand them.” Instead, to prevent another pesky

Freedom of Information Act request of the sort that led to its

first brave disclosure, the Fed has offered physical access to

its building.

A team of Bloomberg investigative reporters, led by Kram

Namttip, was allowed to spend a day examining what remains of

the collateral collected by the Fed during the crisis. What

follows is a brief summary of their findings. To wit:

– A vault in the Fed basement filled with young women, who

claimed, in broken but excited English, they had been repo-ed by

the Italian government.

If Italy has weathered Europe’s sovereign debt crisis so

much better than its fellow deadbeats, here is why: the Fed’s

nervy decision to extend credit to the Italian government

against its prime minister’s social assets.

Relaxed Fed

“That the Fed relaxed its policy and made no distinction

between the 16-year-olds and the 18-year-olds indicated just how

severe they felt the crisis was at the time,” says Merkle

Stewart, associate professor of finance at the University of

Louisiana at Bogalusa.

“Then again, they may have calculated that as the girls

came of age, their value might actually rise, with less risk, at

least outside of Italy.” A Fed spokesman declined to comment,

except to say, “They told us they were 18.”

– Traces of a powdery substance belonging to the giant

Mexican international commodities firm, Los Zetas.

Wisely, the Fed understood by late 2008 that the last thing

that U.S. banks needed was a crisis on the southern border. To

preserve order, and to prevent losses at JPMorgan, the Fed

stepped in to create demand for Mexican exports. To its credit

the Fed didn’t take the value of the Mexican corporate

collateral on faith.

‘Good Sugar’

“At the peak of the crisis the chairman tested the

collateral personally,” says a Fed spokesman. “I remember him

coming out of the men’s room late one night with this huge grin

and his eyes open really wide, and whooping it up to anyone who

would listen, “Whoa! That’s some seriously good sugar!”

– A box of brightly colored beads labeled “If Found,

Return to Ivory Coast.” “No idea what that’s about,” said the

Fed spokesman.

– A snatch from an early draft of what appears to be a

lurid poem, written in German. A rough translation:

Your savings rate so arouses me/

Your exports taste like honey.

Collateral unnecessary/

I would beg to lend you money.

In an official statement the Fed explained that the

quatrain was inspired by a surprising request from a German

bank, the Bayerische Landesbank, for a $500 million loan. “The

chairman is disturbed that his private moments should be deemed

of public interest,” read the statement. “He nevertheless

considers this among his finer works. I mean, that this bank

from a seriously solvent country thought to borrow from us

instead of from the German government. Like, they could have

gone anywhere. He just wanted to show how he felt.”

– Hastily scrawled receipts for several hundred million

dollars in short-term loans to the Taliban.

To the untrained eye, it isn’t obvious how an outlaw sect

in a nation devoid of financial assets became systematically

important to U.S. interests. Apparently, in the heat of the

moment, the Fed saw the high quality of the Taliban’s

collateral, and jumped at the chance to get its hands on it.

“To challenge this difficult decision is very backward-

looking,” says the Fed spokesman. “Osama bin Laden’s value to

the U.S. government was so much greater than the loans we

extended against him that it more than made up for the worries

we had about the equities Morgan Stanley posted, or our doubts

about the teenage girls — not that we ever had any doubts about

those girls.”

When shown documents that suggested that the Federal

Reserve was actually an arm of the U.S. government, and thus in

no position to cut a deal to sell bin Laden to that government,

the Fed spokesman declined to comment.

That bin Laden slipped away and vanished his first night

inside the Fed’s vaults was, the spokesman claimed,


(Michael Lewis, most recently author of the best-selling

“The Big Short,” is a columnist for Bloomberg News. The

opinions expressed are his own.)