By Greg Hunter’s USAWatchdog.com
The Federal Reserve made a stunning revelation this week. It admitted to pumping $9 trillion into the economy because of the financial meltdown in 2008. It provided overnight loans to big U.S. banks with most of the trillions of dollars deployed to keep the system from imploding. Yes, the Fed is credited with saving the world from apocalypse, but how incompetent and corrupt does an institution have to be to let things get this far out of control? This should not be considered as a grand victory but a magnificent failure. CNNMoney.com reports, “Sen. Bernie Sanders, the Vermont independent who had authored the provision of the financial reform law that required Wednesday’s disclosure, called the data that was released incredible and jaw-dropping. “The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution,” Sanders said. He said that even if the Fed was right to make the loans to keep the economy from toppling into a depression, it should have made stronger demands that the banks help American consumers and small businesses.” (Click here for the complete CNN story.)
The Fed should have forced the banks to restructure underwater home loans. After all, the Fed is still their supreme regulator. It did not do that. Instead, the Fed looked the other way, once again, as the banks started foreclosing on homes en masse by using phony paperwork. The ongoing story is dubbed “robo signing” by the mainstream media, but the real story is simple foreclosure fraud.
It wasn’t just U.S. banks that received cut-rate bailout loans but American companies such as General Electric, Harley-Davidson and Verizon. It also bailed out Toyota, a Japanese automaker, that competes for business against our domestic car companies. Can’t Japan bailout its own problems?
Even foreign banks got cheap cash from the generous Federal Reserve. The Washington Post reports, “Foreign-owned banks also benefited from the Fed’s commercial-paper facility. The Korean Development Bank, owned by the South Korean government, used the program to the tune of billions of dollars, including a $407 million short-term loan on a single day. Many foreign banks, including the French BNP Paribas, the Swiss UBS and the German Deutsche Bank, took extensive advantage of various programs. Even a major bank in Bavaria benefited, as well as another one headquartered in Bahrain, a tiny island country in the Middle East. . . . Dallas Federal Reserve President Richard Fisher defended the Fed’s actions during the financial crisis, saying the central bank “stepped into the breach” in its role as a lender of last resort. . . .That’s what we are paid to do,” (Click here to see the complete Washington Post story.)
Excuse me, Mr. Fisher, what the Fed gets “paid to do” is regulate and not allow the bankers to act as if they live in an “anything goes” Wild West casino. The Fed should be ashamed that it did not see this monumental market melt-down coming. It is cold comfort to see the Fed act surprised and pump cash in a panic to keep the economy from falling into a financial abyss. The Washington Post also quoted Senator Sanders, “Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”
“Taking a very extensive look” at the Fed seems like a very good idea. Maybe, now, Congress can push through the first full audit of the nearly 100 year old institution, but I am not going to hold my breath. The Fed says it “didn’t lose a dime” in this deal but, at this point, I don’t really care about the money. The Fed received even more regulatory power from the recently passed Financial Regulation bill signed into law earlier this year. If we didn’t know before, we surely know now, that was a huge mistake because the Fed didn’t use the regulatory power it already had. The Fed missing the enormous oncoming financial failure in 2008 clearly shows the regulators didn’t do their job. What exactly was the Federal Reserve regulating? The $9 trillion cash drop did more than stop (or postpone) a catastrophe–it also exposed the Fed’s incompetence.