Cardinale writes: "The audit was ordered as an amendment by (Sen. Bernie) Sanders as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act - a major banking overhaul passed by President Barack Obama and the US Congress in 2010."
American International Group's (AIG) offices on Wall Street, New York City, 03/02/09. (photo: Mario Tama/Getty Images)
First Federal Reserve Audit Reveals Trillions in Secret Bailouts
29 August 11
he first-ever audit of the US Federal Reserve has revealed 16 trillion dollars in secret bank bailouts and has raised more questions about the quasi-private agency's opaque operations.
"This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else," US Senator Bernie Sanders, an Independent from Vermont, said in a statement.
The majority of loans were issues by the Federal Reserve Bank of New York (FRBNY).
"From late 2007 through mid-2010, Reserve Banks provided more than a trillion dollars ... in emergency loans to the financial sector to address strains in credit markets and to avert failures of individual institutions believed to be a threat to the stability of the financial system," the audit report states.
"The scale and nature of this assistance amounted to an unprecedented expansion of the Federal Reserve System's traditional role as lender-of-last-resort to depository institutions," according to the report.
The report notes that all the short-term, emergency loans were repaid, or are expected to be repaid.
The emergency loans included eight broad-based programmes, and also provided assistance for certain individual financial institutions. The Fed provided loans to JP Morgan Chase bank to acquire Bear Stearns, a failed investment firm; provided loans to keep American International Group (AIG), a multinational insurance corporation, afloat; extended lending commitments to Bank of America and Citigroup; and purchased risky mortgage-backed securities to get them off private banks' books.
Overall, the greatest borrowing was done by a small number of institutions. Over the three years, Citigroup borrowed a total of 2.5 trillion dollars, Morgan Stanley borrowed two trillion; Merrill Lynch, which was acquired by Bank of America, borrowed 1.9 trillion; and Bank of America borrowed 1.3 trillion.
Banks based in counties other than the US also received money from the Fed, including Barclays of the United Kingdom, the Royal Bank of Scotland Group (UK), Deutsche Bank (Germany), UBS (Switzerland), Credit Suisse Group (Switzerland), Bank of Scotland (UK), BNP Paribas (France), Dexia (Belgium), Dresdner Bank (Germany), and Societe General (France).
"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 wrote.
In recent days, Bloomberg News obtained 29,346 pages of documentation from the Federal Reserve about some of these secret loans, after months of fighting in court for access to the records under the Freedom of Information Act.
Some of the financial institutions secretly receiving loans were meanwhile claiming in their public reports to have ample cash reserves, Bloomberg noted.
The Federal Reserve has neither explained how they legally justified several of the emergency loans, nor how they decided to provide assistance to certain firms but not others.
"The main problem is the lack of Congressional oversight, and the way the Fed seemed to pick winners who would be protected at any cost," Randall Wray, professor of economics at University of Missouri-Kansas City, told IPS.
"If such lending is not illegal, it should be. Our nation really did go through a liquidity crisis - a run on the short-term liabilities of financial institutions. There is only one way to stop a run: lend reserves without limit to all qualifying institutions. The Fed bumbled around before it finally sort of did that," Wray said.
"But then it turned to phase two, which was to try to resolve problems of insolvency by increasing Uncle Sam's stake in the banksters' fiasco. That never should have been done. You close down fraudsters, period. The Fed and FDIC (Federal Deposit Insurance Commission) should have gone into the biggest banks immediately, replaced all top management, and should have started to resolve them," Wray said.
Renewed questions about the Federal Reserve have inspired some young activists to organise grassroots protests across the US.
"Since its creation by the US Government in 1913, the Federal Reserve has created so much new money out of thin air that it has destroyed 95 percent of the dollar's value," Joseph Brown, a college student and one of the organisers of a recent protest of the Federal Reserve Bank of Atlanta, said.
"This hidden inflation tax benefits Wall Street and the government, but hurts the poor and those living on fixed incomes, such as senior citizens, the most," Brown said.
The US Government Accountability Office (GAO) audit itself was the result of at least two years of grassroots lobbying. IPS reported in June 2009 a wide bi-partisan coalition of members of Congress had co-sponsored legislation to audit the Federal Reserve.
The audit was ordered as an amendment by Sanders as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act - a major banking overhaul passed by President Barack Obama and the US Congress in 2010.
"I think this (the first ever GAO audit) was a good start to uncovering what the Fed did so that we can begin to determine whether similar actions should ever be permitted again," Wray wrote, adding, "my preliminary answer is a resounding no."
The GAO also found existing Federal Reserve policies do not prevent significant conflicts of interest. For example, "the FRBNY's existing restrictions on its employees' financial interests did not specifically prohibit investments in certain non-bank institutions that received emergency assistance," the report stated.
The GAO report noted on Sep. 19, 2008, William Dudley, who is now the President of the FRBNY, was granted a waiver to let him keep investments in AIG and General Electric, while at the same time the Federal Reserve granted bailout funds to the same two companies.
"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," Sanders said.
The GAO is currently working on a more detailed report regarding Federal Reserve conflicts of interest, which is due on Oct. 18, 2011.
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Comments
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To bail out OTHER countries when the US people are worrying about where their next jobs are coming from is unconscionable. And for us, as citizens, to allow this crude and rude and purely evil form of economics to continue is akin to condoning a private (no "quasi" about it!!) company to COUNTERFEIT!
This is actually no surprise to me, in terms of the fact THAT they "did it," but the EXTENT to which they did it is astounding: secret AND $16 trillion!!
This is corruption at its worse. Protests should begin in the streets, on the blogs, and in the media immediately.
This is as big as it gets, folks. And it's bringing us down faster by the day as more and more get revealed.
Worse part: Congress and most likely, the president, knew...
Beware of the politician calling Social Security "a Ponzi scheme." This politician is in the middle of THE REAL Ponzi scheme: Fed Reserve. He's deflecting and he thinks we're stupid...
N.
Why dont we draft Bernie Sanders fo 3012?
“The few who understand the system, will either be so interested from it’s profits or so dependent on it’s favors, that there will be no opposition from that class.”
- Rothschild Brothers of London writing to their associates in New York, June 25, 1863.
"The System", fully in place over Europe from the 1st half of the 19th century (Adam Smith & Napolean having done their work), is bascially RENT-A-CURRENCY - supposedly "sovereign" governments paying usurers to issue and manage their own currency (in the government's own name). Sounds ridiculous?
Well, it is. But many true phenomenons are:
"What is banking?... The most dangerous as it is the most ridiculous form of universal tyranny the World was ever called upon to destroy."
- Frederick Soddy, Nobel Laurate, 1933
Thomas Jefferson has this to say about the central bank. A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army... We must not let our rulers load us with perpetual debt.
"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men." Woodrow Wilson
Had to love it!
'They' identified the European bankster system as bad, and the American Constitutional system as good- not because their ancestors were slaveowners or petite bourgois who resented 'damn Yankee' federal steamroller... but becuase 'they' could see through the pseudo-democrat ic beast for what it was- just another in a long line of (mostly usurious) scams.
This current one is coming unglued now. All usury and all Ponzi schemes eventually do.... That is unless we are to turn into a two-tiered society of those who have connections to the Banksters (pseudo-politic al class) and those (neo-proletaria t or right-less serfs) who do not.
I believe that we can, should, and will do much better. But 'the opponent' is still managing to get most of our noodles tied up in (cognitive dissonance) knots- which is pretty much the way its been through all recorded history, BTW :-)
Even though we put our money in them, trust them, and they USE our money and refuse to loan us any based on some phony-baloney credit worthiness system -- another bogus private system to keep the middle class and the really poor, POOR!
N.
- Prof. Irving Fisher, 1936
Get over it! He is black and he is president AND he is NO WORSE than what we have had in the past.
We had another baking crisis at the beginning of the last century bought about by the arrogance and wishful thinking of 4 bankers and a gold standard that could no longer meet the every growing ever changing needs of financial construction.
With the repugs and blue-dog dems, "socialism" is a GOOD THING when THEY ARE the SOLE BENEFACTORS.
Read that twice. They sure are!
Ah, yes. The infamous "death Panel".
"I would like to know the names of the people that made these loans to European banks and decided on the 'winners and losers' of the great economic disaster created by out-of-control financial institutions and completely co-opted, co-conspirator regulators."
Yes, I would like to know too - but the very wall of obscurity that has been used to befuddle us and prevent the assignment of responsibility to those who signed off on the decisions, will be anonymous and unreachable, that wall will be used to prevent any identification until many other holes get punched in it. But it is not really hard to tell some of them; Timothy Geithner for one, since he was head of the New York Fed when the secret loans started pouring out through that institution. Bernanke, of course. They are the front men.
Someone, somewhere, somehow.
Please get these two wonderful human beings together running as independent.
Thousands of people will follow them
and after 17th September Wall Street, and
6th October Freedom Plaza, it will be
millions and millions.
Both are Suggestions Ron Paul has been pushing for decades.
Having read Griffin's "Creature from Jekyll Isand", it wouldn't be a bad thing to eliminate the banking cartel (i.e. Fed) EXCEPT for the fact that what the government gets out its marriage to the banking cartel is the ability to borrow (spend beyond its means, i.e. its tax-based budget), even if (or especially because) that money is created out of thin air. If we truly want a country that limits its spending to a balanced budget, we will have to allow major increases in taxes. Otherwise Grover Norquist will achieve his goal of drowning the government in the bathtub. And for the Republicans/Lib ertarians among us who wouldn't care, except for defense, this would include major cuts to the military.
That's the problem you (militarists) inherit when you sit on 2/3 of the discretionary budget. Current Pentagon cuts are already creating major layoffs from the defense contractors here (LA region), adding to California's existing economic / budget woes.
John, you make some very good points. Are you suggesting that, without the Fed, there can be no other mechanism by which the government could print money out of thin air? I think not, though I'm not an expert.
It's a crazy system, but my whole point in commenting is to ask, "How do you dismantle it without it exploding in your face?" You need to somehow replace government revenues [taxes/spending in balance?] and get those revenues into the capitalist system [where do you put the money you spent for an F35 so that Lockheed can borrow it to build it?
A national bank? ]
And they love "Finance and overdraft" charges.
Is anybody else becoming weary and leaden-footed at both hearing about, and trying to deal with, this bail-out fact of our current political and economic lives, and the seeming futility of what to do about it. I can't even imagine a Billion, never mind a Trillion; it becomes meaningless.
I'm gettin' too old for this shit and would like to see a gleam of hope in this great morass of greed, cronyism, bought-and-paid for government at all levels, jingoism, militarism, mean-spiritedne ss and false Messiahs but for the life of me, I can't.
Thinking men (not just propagandists) have been examining this issue [the problem with Banksters running the show] for a long time- prob. most notably in the 1930s, when the symptoms were eerily similar to today's. Yale University's 'Post-Keynesian ' Prof. Irving Fisher perhaps sumized the problems of Banksters best in 1936: 'Nationalize the monetary system; not the banks'.
A country/governm ent not in charge of its own currency is neither 'sovereign' nor 'democratic' in any pure or meaningful definition of those words.
www.zeitgeistmovie.com - Part III of the 2007 Zeigeist: The Movie.
Watch it! Prepare by becoming aware.
N.
the one in New York, Will Dudly (not sure of spelling of his last name) was a former VP for Morgan Stanly and director of Goldman Sachs.
the ne in Philadelphia Charles Plossser served as consultant to Chase bank and one other.
Atlanta President Dennis Lockhart, was on the board for Citifbank, oil companies and other corporations.
the other nine where pretty clean.
But why so many Presidents. they could have one and the other banks Directors or vice pres.
If Obama can’t—or won’t—stop the banks and Wall Street from stealing what little money any of us have left, we should elect Bernie Sanders in 2012.
On whose side does Obama stand? To whom does he owe his allegiance: to us or to the fugging bankers and goddam Wall Street?
Paper money always returns to its intrinsic value... nothing.
Voltaire
The FED is anti capitalism - bail outs do not exist in capitalism, larry the liquidator does.
The FED is communism, 5th plank from communist manifesto to be precise.
Inflation is a tax that hurts the poor and helps those who get the free money first.
wait for it ..
wait ..
Nothing. Their loss would be nothing.
You never mind the extra inflation because I will live like a king!
I am going to create the Tom Bank - I start it out by writing a trillion dollar check to my self (tom dollars) deposit and now I am fully (fooly) funded.
Any one want a loan? ... Oh when you pay back I only accept gold or silver at 100 tom dollars per oz of silver or 1000 tom dollars per oz of gold.
Where did all this money come from? In an age of austerity? Schools? healthcare? That we can't afford.
"and purchased risky mortgage-backed securities to get them off private banks' books."
What a deal! Nationalize the debt, privatize the assets.
This was supposed to stabilize the financial system. I suppose from the bank's perspective this was successful. But are the rest of us also not part of the economy? And with all the foreclosures, I don't suppose that our economy is stabilized.
"and purchased risky mortgage-backed securities to get them off private banks' books."
What a deal! Nationalize the debt, privatize the assets.
That is what happened. We the people are screwed! We have huge liability and no assets. I need a way out of this crap.
This scenario works very well because the rich have bought off our politicians who pass law shielding the rich from any kind of accountability.
We can help by taking action to re-establish the Glass-Stegal (sp?) Act. This would put the burden of paying for the dirivatives on the backs of the banks only and not on we the people. Then let's get rid of naked short selling. These would be good for openers.
It is like giving every man woman and child in the US (including non citizens ) about $45,000 or every house hold about $180,000,000. We of course don't see any of this money. But what was it used for. It is so much that the few that "handled" it could have skimmed off billions for themselves and then paid it bock with the fees etc paid by us at banks paying the difference.
We need to find out what the cash was used for. No matter it was supposedly paid back.
We need to start making sense of our times.
This is it for US.
with a guard at every door;
and their vaults are stuffed with silver,
that the people struggled for!"
(Depression-era fok song)
Pass the Glass-Steagal Act.
Pass the no naked short selling.
The people have to do this because the politicians won't. Use the Initiative Process (petition).
Thomas Jefferson has this to say about the central bank. A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army... We must not let our rulers load us with perpetual debt.
"Give me control of a nation's money and I care not who makes the laws." Mayer Amschel Rothschild/Bank er
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