Mankato — While the Federal Reserve fronted the big banks $7.7 trillion during the 2008 bailout, they turned around and made $13 billion, and taxpayers never knew they had been duped in this scam of historic proportions. Until now.
Bloomberg News has been fighting the Fed and large U.S. banks for two years to allow the public to see how the Fed was spending and risking the money backed by the full faith and credit of the U.S. taxpayers.
It’s no surprise the Fed and a cadre of lawyers fought release of the information Bloomberg sought under the Freedom of Information Act. It’s plenty damning.
According to Bloomberg: “The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy.”
Bloomberg also conducted an analysis that estimates banks made about $13 billion by taking advantage of the low rates charged for the emergency loans.
The news organization also detailed how bankers and to some extent the Fed lobbied against government regulations that would have prevented the same thing from happening again. Congress would have likely passed limitations on a bank’s size had it known the details of the emergency loans and Fed largesse.
The $7.7 trillion in loans or guarantees was 10 times greater than the separate, but equally questionable Troubled Assets Relief Program, known as TARP, that had a cost of $700 billion.
The Fed and the banks contend almost all of the money has been repaid, but as Bloomberg points out, taxpayers paid in other ways: “..taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.”
Taxpayers of all political stripes should be outraged not only at the secrecy of the deal-making, but at the sheer size of the bailout. As Senate Democrat Sherrod Brown of Ohio told Bloomberg: “This is an issue that can unite the Tea Party and Occupy Wall Street.”
Brown introduced a bill to limit bank size in 2010 that did not pass, but he said, many members of Congress would now likely change their vote seeing the bailout in its true light.
The Fed with its Chairman Ben Bernanke argued in court that disclosure of the information would create a stigma among investors and others that did business with the needy banks, and they would be reluctant to use Fed loans again should the need ever arise.
That’s a weak argument and one that won’t fly, especially with millions of Americans who’ve had to live with the “stigma” of unemployment and foreclosure. . . .
Secrecy is never good for democracy, and in this case, it also wasn’t good for the economy now hammering all Americans.
The Free Press