Federal Reserve provided $16 trillion in secret bailout loans during credit crisis

July 22, 2011 by · Leave a Comment
Filed under: Global News 

First off I’ll apologize for the less frequency in news pieces.  I have been in the process of moving and it has not gone as smooth as you’d wish.  Regardless, how could I ever pass on a juicy nugget like this one from the outspoken gentlemen from Vermont, Senator Bernie Sanders.

$16 trillion dollars is actually quite a bit of money.  That is more than the total Gross Domestic Product (GDP) of the united states for an entire year.  365 days of any productive commerce in America.  A GAO report has been published that investigates the accounting of the U.S. central banking institution. It is a 236 page report and I don’t have any opinion until I sit down and read it, which I intend to very shortly, like now.  I found a chart in the appendix that showed a $8 trillion dollar loan / exchange / swap to the European Central Bank.  Bank of England and the Swiss National Bank also were also heavy recipients of assistance from the Fed.  Hopefully more insightful data points are waiting to be uncovered.

What we are in a sense saying is that the banking system in its present state is “so” important that it or parts will not be allowed to fail from market forces.  This problem is their is no limit to the amount of credit or assistance that can be given.  These dollars are not totally sterile, these banks us them as reserves that loans can be made against.  This question should be the prerogative of the people and we should be made aware when such use of our credit facilities are made. This is the great moral hazard, now they know they in fact are “too big to fail”.

Sen. Sanders Website:

The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse.  In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.


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