- At a Senate Budget Committee hearing in 2009, I asked
Fed Chairman Ben Bernanke to tell the American people the names of the
financial institutions that received an unprecedented backdoor bailout
from the Federal Reserve, how much they received, and the exact terms of
this assistance. He refused. A year and a half later, as a result of an
amendment that I was able to include in the Wall Street reform bill, we
have begun to lift the veil of secrecy at the Fed, and the American people
now have this information.
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- It is unfortunate that it took this long, and it is a
shame that the biggest banks in America and Mr. Bernanke fought to keep
this secret from the American public every step of the way. But, the details
on this bailout are now on the Federal Reserve's website, and this is a
major victory for the American taxpayer and for transparency in government.
You can check for yourselves.
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- Importantly, my 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 Wednesday 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.
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- After years of stonewalling by the Fed, the American
people are finally learning the incredible and jaw-dropping details of
the Fed's multi-trillion-dollar bailout of Wall Street and corporate America.
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 and how we can make our financial institutions more responsive
to the needs of ordinary Americans and small businesses.
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- What have we learned so far from the disclosure of more
than 21,000 transactions? We have learned that the $700 billion Wall Street
bailout signed into law by President George W. Bush turned out to be pocket
change compared to the trillions and trillions of dollars in near-zero
interest loans and other financial arrangements the Federal Reserve doled
out to every major financial institution in this country. Among those are
Goldman Sachs, which received nearly $600 billion; Morgan Stanley, which
received nearly $2 trillion; Citigroup, which received $1.8 trillion; Bear
Stearns, which received nearly $1 trillion, and Merrill Lynch, which received
some $1.5 trillion in short term loans from the Fed.
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- We also learned that the Fed's multi-trillion bailout
was not limited to Wall Street and big banks, but that some of the largest
corporations in this country also received a very substantial bailout.
Among those are General Electric, McDonald's, Caterpillar, Harley Davidson,
Toyota and Verizon.
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- Perhaps most surprising is the huge sum that went to
bail out foreign private banks and corporations including two European
megabanks -- Deutsche Bank and Credit Suisse -- which were the largest
beneficiaries of the Fed's purchase of mortgage-backed securities.
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- 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.
- Has the Federal Reserve of the United States become the
central bank of the world?
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- The Fed said that this bailout was necessary to prevent
the world economy from going over a cliff. But three years after the start
of the recession, millions of Americans remain unemployed and have lost
their homes, life savings and ability to send their kids to college. Meanwhile,
big banks and corporations have returned to making huge profits and paying
their executives record-breaking compensation packages as if the financial
crisis they started never happened.
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- What this disclosure tells us, among many other things,
is that despite this huge taxpayer bailout, the Fed did not make the appropriate
demands on these institutions necessary to rebuild our economy and protect
the needs of ordinary Americans.
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- For example, at a time when big banks have nearly a trillion
dollars in excess reserves parked at the Fed, the Fed did not require these
institutions to increase lending to small- and medium-sized businesses
as a condition of the bailout.
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- At a time when large corporations are more profitable
than ever, the Fed did not demand that corporations that received this
backdoor bailout create jobs and expand the economy once they returned
to profitability.
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- I intend to investigate whether these secret Fed loans,
in some cases, turned 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. 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. That is
something that we have got to closely examine.
- 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?
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- 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?
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- We have begun to lift the veil of secrecy at one of most
important agencies in our government. 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.
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- Copyright © 2010 HuffingtonPost.com, Inc.
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- Bernie Sanders was elected to the U.S. Senate in 2006
after serving 16 years in the House of Representatives. He is the longest
serving independent member of Congress in American history.
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