The MSMs all have short items on the House Committee on Oversight and Government Reform’s unusal subpoena of the Federal Reserve, demanding records related to Bank of America’s acquisition of Merrill Lynch during the panic months last fall.

The issue is whether the Fed, as the Financial Times puts it, put “undue pressure” on BoA to do the deal even after the scale of Merrill’s problems became apparent as it moved to close.

FT got a peak at testimony that BoA CEO Ken Lewis has prepared for an appearance before the committee on Thursday:

In his prepared testimony, seen by the Financial Times, Mr Lewis says that the Treasury and Fed “expressed significant concerns about the systemic consequences and risk to Bank of America” of declaring a “material adverse change” – a step that would precede canceling the transaction.

The subpoena itself is puzzling; if Congress is going to subpoena the Fed every 20 years or so, this would not be the topic. The Fed had already cooperated, though apparently not enough. And of all Fed moves lately, why this particular deal? Merrill was so toxic there were no good options from taxpayers’ point of view, so whose interests are at stake—BoA shareholders’?

The real interest is that the tiny item points up a yawning gap in major news outlets’ coverage of the Fed generally, a gap filled to the extent possible by financial blogs, notably Naked Capitalism, which picked up the item this morning.

I don’t think the general reader, or even the close business press reader, fully appreciates the scope of what the Federal Reserve has done in its attempt to rescue the financial system in the months following the Lehman bankruptcy. Put it this way, the next installment of the Transformer series might star the U.S. central bank.

Bloomberg, it should be said, has been trying to keep track. This story from February by Mark Pittman and Bob Ivry, notes that the U.S. government generally had committed $9.7 trillion to solving the financial crisis, “enough to pay off more than 90 percent of the nation’s home mortgages…enough to send a $1,430 check to every man, woman and child alive in the world,” with the Fed playing a leading role.

Here’s how the figure breaks down:

The promises are composed of about $1 trillion in stimulus packages, around $3 trillion in lending and spending and $5.7 trillion in agreements to provide aid. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps.

And here’s where the Fed’s balance sheet stood at the time:

Federal Reserve lending to banks peaked at a record $2.3 trillion in December, dropping to $1.83 trillion by last week. The Fed balance sheet is still more than double the $880 billion it was in the week before Sept. 17 when it agreed to accept lower-quality collateral.

The point isn’t to judge whether the Fed’s moves are warranted, a good idea, unavoidable, or what, only that the agency isn’t the same one that we’re used to. And it operates outside the oversight of Congress, except for the odd subpoena, and, in this case, on a side issue at that.

Now, of course, there is a lot of Fed watching, that is to say, commentary and interpretation of its official actions. And among the MSM, Bloomberg has led on Fed coverage, especially on prying loose records on the quality of collateral banks are posting in return for Fed loans. But to say that more coverage of the Fed as an institution is warranted is to understate the case.

If you think the Fed’s inspector general, Elizabeth A. Coleman, is on top of it, this exchange with Floriday Rep. Alan Grayson, posted by Zero Hedge, will disabuse you of that idea.

Grayson: “If your agency has in fact, according to Bloomberg, has extended more than $9 trillion in credit, which, by the way works out to more than $30,000 for every man, woman, and child in this country, extended I’d like to know if you’re not responsible for investigating that, who is?”

Coleman: “We actually, we have responsibility for the Fed Reserve programs and operations, to conduct audits in that area. In terms of investigating, would you mind repeating the question one more time?”

Oy.

Fed independence is an important concern, apparently; that’s why Congress doesn’t subpoena it very often. The lack of oversight and the Fed’s traditional secrecy—again, there are good reasons for this—make it difficult to cover and at the same make covering it all the more imperative.

Naked Capitalism makes the important point that the Fed’s independence isn’t what it used to be, thanks particularly to Alan Greenspan, whose reputation seems to dim with each passing day.

It quotes former Federal Reserve economist Richard Alford who puts the Fed’s supposed independence in perspective:

Compare the behavior of the Chairmen of the 1950s and Volcker to that of Greenspan. Chairman Eccles and McCabe both lost their Chairmanships because they wouldn’t compromise Fed independence. They stood their ground even after being summoned to the White House. Martin, appointed by Truman, was in later life referred to by Truman as “the traitor” presumably for taking the punch bowl away. The public image of Volcker is that of a man who twice a year endured public Congressional assaults, resisted political pressure, and enabled the Fed to stay the course.

Greenspan, on the other hand, jumped at the chance to meet Clinton, traveling to Little Rock before the inauguration. Bob Woodward in his book “Maestro” quotes Clinton telling Gore after the pre-inauguration meeting: “We can do business.” Woodward also quotes Secretary of the Treasury Bentsen telling Clinton that they had effectively reached a “gentleman’s agreement” with Greenspan. The agreement evidently involved Greenspan’s support for budget deficit reduction financed in part by tax increases. It is not clear what Greenspan received.

That set a bad precedent:

Greenspan risked the NASDAQ bubble during the Clinton years (part of the quo for the quid?) and more recently implicitly accepted the risk of a housing bubble as he touted ARMs as the Bush Administration and Congress promoted the ownership society. Financial innovation was lauded while it produced short-term gains. The Fed failed to adequately pursue its regulatory responsibilities as it kept rates low, despite the relatively high levels of leverage, derivatives markets that dwarfed the underlying cash markets, breakdowns in lending standards and credit spreads that even it didn’t think compensated for the risks. Like Greenspan, the current Fed implicitly decided to risk long term stability rather than incur short-term costs.

And, now the Fed, doing a U-turn, is running off on its own, Alford says:

After failing to use the independence granted to it by statute, the Fed is now pushing the bounds of its legal authority. It is making decisions that might better be reserved for elected officials. It argues that these steps are necessary, but the Fed is being drawn into the micro management of credit allocation and income re-distribution — a far cry from “inflation targeting”. The Fed is willingly injecting itself into areas that are the provenance of the Congress.

Arguments rage about how we got into the current mess and how well we’re doing getting out of it. Without better Fed coverage, there’s no way to know.

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014).

Follow Dean on Twitter: @deanstarkman.