BURLINGTON, Vt., Jan. 11 - Even after a new law uncloaked what were secret subsidies for big banks and other financial institutions, Federal Reserve Chairman Ben Bernanke remains evasive about details of $3.3 trillion in emergency loans.
A provision by U.S. Sen. Bernie Sanders (I-Vt.) in the Wall Street reform law forced the Fed on Dec. 1 to disclose which banks, corporations and individuals received loans doled out during the financial crisis. Sanders posed a series of follow-up questions in a letter to Bernanke on Dec. 6 about loans to foreign automakers, help for credit card companies that soak consumers with loan-shark interest rates, and potential conflicts of interest involving Fed governors. Sanders' questions remained mostly unanswered in a letter from Bernanke dated Jan. 5.
"When I wrote to Chairman Bernanke, I was concerned that credit did not flow to small businesses despite the Fed's claims that it would, that the Fed boosted sales of foreign cars at the very moment the American auto industry was in collapse, that billionaires got Fed assistance to make even more money at the same time that millions of Americans lost their jobs and many lost their homes. I was especially concerned that directors of the Fed simultaneously worked for banks and corporations that were bailed out - that the foxes were in fact guarding the henhouse," Sanders said.
"I called for clear responses to these reasonable concerns, but got none," the senator added. "I find it amazing, but not surprising, that Chairman Bernanke could write a six-page letter in response to questions I had regarding the Fed's emergency lending programs without directly answering a single one of my specific questions."
Bernanke would not say how many of the 2 million in auto loans spurred by the Fed's emergency actions helped buy foreign cars, although the initial disclosure revealed that BMW, Nissan, Volkswagen, and Honda received substantial assistance.
Bernanke said the emergency lending program supported "hundreds of millions of U.S. credit card loans," but would not reveal how many of these cards carried interest rates of 20 percent or more.
Bernanke claimed the Fed does not know how much money wealthy private investors gained from an emergency lending program. Several multi-millionaires - including the wife of the CEO of Morgan Stanley (Christy Mack); the former owner of the Miami Dolphins (H. Wayne Huizenga); a multi-billionaire hedge fund manager (John Paulson); and the founder of one of the largest computer companies in America (Michael Dell) - stood to make significant profits or to have the Fed cover 90 percent of any losses they might incur.
Bernanke refused to disclose details of securities pledged as collateral by recipients of over $885 billion in emergency Fed lending, a lapse that a former Fed official called a violation of "the spirit of what the requirements were in Dodd-Frank," the Wall Street reform bill.
Bernanke also declined to detail steps to avoid conflicts of interest by Fed governors. Those concerns were heightened by disclosures that the Fed lent $16.1 billion to General Electric and more than $160 billion to JPMorgan Chase during the financial crisis, even as Jeffrey R. Immelt of G.E. and Jamie Dimon of JPMorgan were directors of the Federal Reserve Bank of New York.
"The American people deserve direct answers to these important questions. If Chairman Bernanke won't answer these questions, I hope that the Government Accountability Office will," Sanders said. A Sanders' provision in the Wall Street reform law ordered the non-partisan investigative arm of Congress to conduct a top-to-bottom audit of the Fed.