"Almost two years ago I asked Chairman Bernanke to tell the American people which financial institutions and corporations received trillions of dollars as part of the Wall Street bailout. He refused. Today, as a result of an audit-the-Fed provision I put into the financial reform bill, we finally learn the truth - and it is astounding."
— Sen. Bernie Sanders (I-Vt.), author of Fed disclosure provision
"We took an enormous amount of risk with the people's money."
— Richard Fisher, president, Dallas Federal Reserve (Washington Post)
The $3.3 trillion in emergency loans and other assistance and more than $9 trillion in more than 21,000 short-term loans and other financial arrangements were disclosed by the Federal Reserve on their Web site in response to a provision by Sen. Bernie Sanders in the new financial reform law. The figures revealed dwarf the $700 billion Treasury Department bank bailout out signed into law under President George W. Bush - which Sanders voted against.
Calling the revelations "jaw dropping," Sen. Bernie Sanders said the disclosure by the Fed "begins to lift the veil of secrecy at the Fed." The disclosure was strenuously opposed by Chairman Ben Bernanke during a 2009 Senate Budget Committee hearing. You can watch that exchange here. Sanders "led a fight against the powerful U.S. Federal Reserve and won, forcing the central bank to disclose more details than ever on its rescue actions during the financial crisis," according to a Wall Street Journal profile of the senator.
"What we are seeing is the incredible power of a small number of people who have incredible conflicts of interest getting incredible help from the taxpayers of this country while ignoring the needs of the people," Sanders said. To read the senator's full statement, click here.
The Big Winners
• Goldman Sachs received nearly $600 billion
• Morgan Stanley received nearly $2 trillion
• Citigroup received $1.8 trillion
• Bear Stearns received nearly $1 trillion
• Merrill Lynch received some $1.5 trillion
• Deutsche Bank, a German lender, sold the Fed more than $290 billion worth of mortgage securities
• Credit Suisse, a Swiss bank, sold the Fed more than $287 billion in mortgage bonds
Also receiving secret Fed bailouts
• General Electric
• Harley Davidson
Questions We Need To Ask
"Instead of using this money to reinvest in the productive economy, I suspect a large portion of these near-zero interest loans were used to buy Treasury securities at a higher interest rate providing free money to some of the largest financial institutions in this country on the backs of American taxpayers," Sanders said.
- Did these secret Fed loans, in some cases, turn out to be direct corporate welfare to big banks that used these loans not to reinvest in the economy but rather to lend back to the federal government at a higher rate of interest by purchasing Treasury Securities?
- At a time when big banks have nearly $1 trillion in excess reserves parked at the Fed, the Fed did not require those institutions to increase lending to small and medium-size businesses as a condition of the bailout?
- At a time when large corporations are more profitable than ever, why didn't the Fed demand that corporations that received backdoor bailouts create jobs and expand the economy once they returned to profitability?
- At a time when the Fed lent money to investors holding credit card debt, it did not require any interest rate caps for consumers, leading many of them to pay credit card interest rates of 28 percent or higher.
- To what degree did secret Fed loans turned out to be direct corporate welfare to big banks?
- Has the Federal Reserve of the United States become the central bank of the world?
- At a time when big banks have nearly a trillion dollars in excess reserves parked at the Fed, why didn't the Fed require these institutions to increase lending to small and medium-sized businesses as a condition of the bailout.
- At a time when Wall Street executives are now making more money than before the financial crisis, how many big banks that paid back TARP funds in 2009 to avoid limits on executive compensation received no-strings attached loans from the Federal Reserve?
- At a time when millions of Americans are paying outrageously high credit card interest rates, why didn't the Fed require credit card issuers to lower interest rates as a condition of the bailout?
- The four largest banks in this country (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) issue half of all mortgages in this country. We now know that these banks received hundreds of billions from the Fed. How many Americans could have remained in their homes, if the Fed required these bailed-out banks to reduce mortgage payments as a condition of receiving these secret loans?
- What are the rules governing the Fed, who makes these rules or are they just made up as they go along?
Sanders' amendment also required the Government Accountability Office to conduct a top-to-bottom audit of all of the emergency lending the Fed provided during the financial crisis to be completed on July 21, 2011, which will take a hard look at all of the potential conflicts of interest that took place with respect to this bailout. So, in many respects, details that the Fed was forced to divulge on about the $3.3 trillion in emergency loans that until now were totally kept from public scrutiny, marked the beginning, not the end, of lifting the veil of secrecy at the Fed.
To read more about the senator's disclosure and audit amendment, click here.