Fed’s ‘Backdoor Bailout’ Provided $3.3 Trillion in Loans to Banks, Corporations
Audit reveals the scope of "emergency" loans. Bernie Sanders wants to know if "secret Fed loans turned out to be direct corporate welfare to big banks." It's time to expand this investigation—and to conbsider Robert Pollin's proposal to put at least some of this money to work for the US economy.
With the lifting of the “veil of secrecy at the Fed,” in response to a legislative push led by US Senator Bernie Sanders, I-Vermont, reveals that the Federal Reserve gave banks, multinational corporations and foreign financial institutions—many of them with limited ties to the United States—an estimated $3.3 trillion in emergency loans and other forms of assistance during the course of the current financial crisis.
“We now know that the Fed loaned trillions of dollars at zero or near-zero interest rates not only to the largest financial institutions in this country, but also to many of our largest corporations—including GE, McDonalds and Verizon. Most surprising, the Fed also lent huge sums of money to foreign private banks and corporations” says Sanders, who since the 1990s has, with Texas Congressman Ron Paul, Florida Congressman Alan Grayson and a handful of others, been an ardent critic of the Fed’s secrecy, unaccountable financial manipulations and coziness with Wall Street.
The document dump confirms that the $700 billion Treasury Department bank bailout out signed into law under President George W. Bush in 2008 was a small down payment on an secretive "backdoor bailout" that saw the Fed provide roughly $3.3 trillion in liquidity and more than $9 trillion in short-term loans and other financial arrangements. With hundreds of billions in US money going to foreign financial institutions, Sanders asks: "Has the Federal Reserve of the United States become the central bank of the world?"
Questions like that explain why the Fed did not want to release this information. Fed chairman Ben Bernanke lobbied against the amendment Sanders attached to the financial services reform legislation passed this year by the Congress. Sanders and his allies prevailed—although not too the full extent that they had hoped—in forcing an the release of secret Fed files and forcing the Government Accountability Office to conduct a top-to-bottom audit of the Fed.
“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,” says Sanders. “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.”
So astounding, in fact, that even the Wall Street Journal is praising Sanders. "The release of this data on some 21,000 Fed transactions over the last three years is one of the rare useful provisions in (the financial reform bill)," writes the Journal, adding, "kudos to our favorite Socialist for demanding it."