[P2P-F] The Fed Audit - $16 trillion in secret loans,...

Wed Aug 3 15:10:23 CEST 2011

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

July 21, 2011

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<http://sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf>
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.

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<http://sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf>
.

http://sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf
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