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WASHINGTON, July 21 –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 (I-Vt.). “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. Said Sanders: “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.”
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.
In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.
To Sanders, the conclusion is simple. “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed,” he said.
The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.
The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.
A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”
To read the GAO report, click here.
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Funny how they do not call it socialism when they do it.
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Leahy, Sanders and Welch all should be stepping aside and encouraging a new cadre of true progressives in running for federal office.
Our current federal representation has proven that in some cases they are too cowardly to stand up and fight, and in other cases they just don’t disagree with the radical right wing politicians (remember Welch and his attacks against ACORN that continue to this day).
Oh, but when they know they don’t stand a chance in hell of succeeding they’ll make long floor speeches or send out press releases.
Leahy, Sanders and Welch have been abject failures.
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YOU GO BERNIE! We look to you to dig out this kind of information… yours is the voice I listen to. And I support our Congressional delegation completely.
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What are the consequences of the Fed passing out this money?
Good?
Bad?
How does this tie to the national debt? If we default will the interest on Fed loans go up? Will we be put in the position to never get back all this money?
I just don’t understand this very well
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perhaps legal since they change the laws at their whim.
I believe it’s theft from the American people since we’re the ones who are expeceted to pay it back.
The Fed should lose their charter. The People must be in charge of our own currency the way the founding fathers insisted.
Democrats and republicans alike are responsible. They do nothing to change this terrible, terrible system.
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Good example of the power corporations have in Washington….Since Citizens United case, the corporations have a clear go-ahead to give and receive money with no accountability…thereby controlling candidates, elections, and legislators. All Congress now walks on”tip toe” when dealing with corporations because the big dollars are needed for campaigning….excepting, of course, our own wonderful Vermonters–Leahy, Sanders and Welch.
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Incredible! I was turned on to this post while reading an Occupy Wall Street Blog. I hate to say it, but when it comes to Obama’s White House, it’s an Old Favorite: ‘ Meet the New Boss, just the same as the Old Boss…’
I owe Social Security an over-payment ( Their Fault, not Mine…), of a couple of Thousand Dollars and they are after me like a pack of rabid-dogs about it. But Chase, Morgan Stanley,Wells Fargo, Scotland, S.Korea – Trillions is not even an issue…
Thank God for the likes of Bernie Sanders and the thousands now engaged in the % 99 Protests.