Wednesday, November 16, 2011
Federal Reserve Bank Secretly Lent 16 Trillion to US & Foreign Banks
The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out foreign, as well as American banks since 2008. The audit of the Federal Reserve was carried out in the past few months largely due to the bipartisan efforts of libertarian Texas Republican Congressman Ron Paul and socialist Vermont Senator Bernie Sanders.
"As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."
Among the investigation's key findings is that the Fed unilaterally provided $16,000,000,000,000 dollars in financial assistance to foreign banks and corporations from South Korea to France and Scotland, according to the GAO report. From the period between December 2007 and June 2010, the Federal Reserve secretly bailed out these institutions, referring to them as loans, but virtually none of the money has been returned - it was loaned out at 0% interest.
Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious - the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.
Make no mistake: The Federal Reserve System is the most powerful financial and economic institution in the world, with virtually no accountability to democratic processes.
As proof, the value of all good and service produced in the United States in the course of a year ("Real GDP") is 14 Trillion. The Fed gave away 16 trillion in Bailouts.
The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.
For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.
In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. In other words, the Fed chose to use taxpayer money to grant funds to institutions in which the NY Fed President had personal investments and a vested interest.
The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts - they were just "appointed" by Fed bamkers to receive and process the bailouts funds. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.
The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..
Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)