No, Bucco, a half a trillion dollars in swaps doesn't happen in "under the radar". There are two parties to a swap, and as you have determined, one was the U.S Federal Reserve Bank and the others were the central banks of other sovereign nations. Believe me when I tell you that people on the swaps desks at virtually every major financial institution in the world knew that the Fed executed those swaps, within minutes after they were executed.

The Federal Open Market Committee (FOMC, the committee chaired by the Fed Chairman and made up of the presidents of the Federal reserve banks, that sets interest rates and monetary policy for the country) authorized temporary reciprocal currency arrangements (central bank liquidity swaps) with the European Central Bank and the Swiss National Bank to help provide liquidity in U.S. dollars to overseas markets. Subsequently, the FOMC authorized liquidity swap lines with additional central banks throughout the world. The swap lines are designed to improve liquidity conditions in U.S. and foreign financial markets by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions during times of market stress. Certainly we would all agree that we're currently in a period of financial market stress.

I'm not sure there was anything "Kafkaesque" about the exchange between the Fed Chairman and Congressman Grayson (meaning "marked by surreal distortion and a sense of impending danger"). The nominal financial exposure resulting from a liquidity swap is a very small proportion of the face value of the swap, associated mostly with foreign exchange ates between the two currencies involved.

Let's put things in perspective...

• Half a trillion dollars is a lot of money, and Congressman Grayson made it sound that way. But from the perspective of the Chairman of the Federal Reserve Bank, it's not much more than the pea under the mattress as in the play "The Princess And The Pea".
• The Fed Chairman is charged with the responsibility of managing an economy which generates somewhere in the range of $3.5 trillion dollars in GDP per year. Half a trillion is 14% of that amount. But the actual exposure created by executing half a trillion dollars in liquidity swaps is far less than that amount, as I explained above.
• The total amount if U.S. debt outstanding is currently about $11.6 trillion. Half a trillion is 4% of that amount, again far less on a nominal basis.

Congressman Grayson, looking for an opportunity to get a soundbite on TV, asks the Fed Chairman a question about a series of financial transactions with other central banks that were so small relative to his total responsibility that no reasonable person would expect the Fed Chairman to be able to answer the question in detail. That is particularly true given that the exposure was the result of liquidity swaps executed with a number of other foreign nations, a fairly routine transaction for the Federal Reserve Bank to undertake. Even the Huffington Post got on the bandwagon, trying to make a mountain out of a publicly announced and a series of fairly routine transactions by totaling them up and writing about the total of the swaps executed.

Why the significant increase in the use of liquidity swaps in 2009 compared to 2007? Does anyone think that the economic circumstances are the same now as in 2007? Does anyone believe that the liquidity of the financial markets is the same? Is it reasonable for the Fed Chairman and the presidents of the Federal Reserve banks to authorize these transactions for the benefit of market liquidity and for the benefit of those doing business in U.S. dollars? Don't forget that all the oil purchased in the world by all countries and all users is paid for in U.S. dollars. (OPEC requires payment in U.S. dollars.) If there is a tightening of liquidity in our currency, oil stops flowing really quickly.

"Under the radar", "in the dead of night", "Kafkaesque"...those are laughable terms to describe the exchange between the Fed Chairman and a publicity-seeking Congressman over a fairly routine transaction that while designed to benefit the U.S., is not significant in the grand scheme of things at the Federal Reserve Bank of the U.S.

Regarding the "dead of night" term...of course the transactions occurred in the dead of night. If the swaps were put in place at 4:00 PM Washington time, that's about 10-11:00 PM in Europe, early morning in the Far East. The "dead of night"...of course it was in the dead of night. Like Jimmy Buffett says, "It's always five o'clock somewhwere."

I think what we have here is a congressman trying to get some TV face time moreso than any kind of impending financial doom caused by the U.S. Federal Reserve Bank.