Rep. Alan Grayson: "Thank you very much, Mr. Chairman. Um, Inspector Coleman, you are the Inspector General for the Federal Reserve, right?
Inspector General Elizabeth Coleman: That's correct.
AG: Okay. Have you done any investigations concerning the Federal Reserve's role in deciding not to save Lehman Brothers, which led to shockwaves that went through the entire financial system?
EC: Um. In that particular area.... You know, I do generally comment on specific investigations but ... we do not currently have an investigation in that particular area.
AG: Alright, what about the one trillion dollars plus in expansion of the Federal Reserve's balance sheet since last September. Have you conducted any investigations regarding that?
EC: We– Right now we have a, um, we call it a review, and, uh, prior to—the term 'investigation' may have different connotations—so we're actually conducting a fairly high-level review of the various lending facilities collectively, which would include, um ... you know, totale, a variety of the different programs that are in process, so we're looking at them at a very highlevel to identify risk.
AG: Well, I understand that, but we're talking about events that started unfolding eight months ago; have you reached any conclusions about the Fed expanding its balance sheet by over a trillion dollars since last September?
EC: We have not yet reached any conclusions.
AG: Do you know who received that money?
EC: [pause] For the ...? We're in the process of doing our review, and, um....
AG: Right, but you're the Inspector General and my question is specifically do you know who received that one trillion dollars plus that the Fed expended and put on its balance sheet since last September; do you know the identity of the recipient?
EC: I do not know; we have not looked at that specific area ... at this particular point on those reviews.
AG: What about Bloomberg's report that there are trillions of dollars in off-balance-sheet transactions that the Federal Reserve has entered into since last September? Are you familiar with those off-balance-sheet transactions?
EC: You know, I think it may be important at this point to bring up, um, a certain aspect related to our jurisdiction, and just to clarify, perhaps, some of my earlier comments. We are the Inspector General for the Board of Governors, and we have direct oversight over Board programs and operations, and are also able to look at Board delegated functions to the reserve banks, as well as its oversight and supervision of the reserve banks. We do not have jurisdiction to directly go out and audit reserve bank activities specifically. Nevertheless, in our lending facilities project, for example, we are looking at the board's oversight over the program, to the extent that it extends out to the Federal Bank of New York.
AG: Well, I have a copy of the Inspector General Act here in front of me, and it says, among other things, that it is your responsibility to conduct and supervise audits and investigations relating to the programs and operations of your agency—
EC: That's correct.
AG: –so I'm asking you if your agency has in fact, according to Bloomberg, extended nine trillion dollars in credit—which, by the way, works out to thirty thousand dollars to every single man, woman, and child this country—I'd like to know if you're not responsible for investigating that, who is?
EC: That—we, actually, we have responsibility for the Federal Reserve programs and operations, audits—to conduct audits and investigations in that area. Um ...[pause]... in terms of who's responsible for investigating ... would you mind repeating the question one more time?
AG: What have you done to investigate the off-balance-sheet transactions conducted by the Federal Reserve which, according to Bloomberg, now total nine trillion dollars in the last eight months?
EC: I—I'll have to look specifically at that Bloomberg article, I'm not, uh, I don't know if I've actually seen that particular one.
AG: That's not the point. The question is: have you done any investigation or auditing into off-balance-sheet transactions conducted by the Federal Reserve?
EC: At this point, we're at the very—we're conducting our lending facility project at a fairly high level and have not gotten to a specific level of detail to really be in a position to respond to your question.
AG: Have you done any investigation or auditing of the losses that the Federal Reserve has experienced on its lending since last September?
EC: We're still in the process of conducting that review; until we actually, you know, go out and gather the information I'm not in a position to respond to that particular question.
AG: So are you telling me that nobody at the Federal Reserve is keeping track on a regular basis of the losses that it incurs on what is now a two trillion dollar portfolio?
EC: I don't know if—you're telling me that they're—you're missing that their loss is undistinctive(?)—we're not.... Until we actually look at the program, and have the information, we're not in the position to say whether they're losses or to respond in any other way to that ... to that particular—
AG: Mr. Chairman, my time is up, but I have to tell you honestly that I am shocked to find out that no one, including the Inspector General, is keeping track of this.
Chair: All right, thank you gentlemen....
