For over three and a half years, Vermonters and people throughout this country have experienced the worst economic crisis since the Great Depression. Millions of Americans, through no fault of their own, have lost their jobs, homes, life savings and ability to send their kids to college. Small businesses have been unable to get the credit they need to expand their businesses, and credit is still extremely tight. Wages as a share of national income are now at the lowest level since the Great Depression with workers who still have jobs working longer hours for lower wages.
Meanwhile, when small business owners and Vermonters were being turned down for loans at private banks, the Federal Reserve provided trillions of dollars in loans at nearly zero interest to the largest financial institutions, major corporations and some of the wealthiest people in the world with virtually no strings attached.
More than two years ago, I asked Ben Bernanke, the chairman of the Federal Reserve, a few simple questions that I thought the American people had a right to know: Who did the Fed bail out? How much did they receive? What were the terms of this assistance?
Incredibly, the chairman of the Fed refused to answer these fundamental questions about how trillions of taxpayer dollars were being put at risk.
Thanks to an amendment that I included in the Wall Street Reform and Consumer Protection Act to audit and investigate the Fed, the American people are finally getting answers to these questions.
A few days ago, the nonpartisan Government Accountability Office completed the first independent investigation into the emergency actions taken by the Federal Reserve. As a result of this investigation, we now know that the Federal Reserve provided a jaw-dropping $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the world.
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. In my view, no agency of the United States government should be allowed to bail out a foreign bank or corporation without the direct approval of Congress and the president.
The GAO 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.
The GAO investigation also revealed that the Fed outsourced virtually all of the operations of its 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.
Getting this type of disclosure was not easy. Wall Street and the Federal Reserve fought it every step of the way. But, as difficult as it was to lift the veil of secrecy at the Fed, it will be even harder to reform the Fed so that it is more responsive to the needs of ordinary Vermonters and small business owners. One thing is abundantly clear: Vermonters and people throughout this country deserve a government that works for them, not just the CEOs on Wall Street.