The Federal Reserve yesterday released details regarding thousands of loans it doled out to some of the nation's largest financial institutions during the height of the economic downturn. In sum, the nation's central bank loaned out more than $12 trillion.
The document dump was in response to legislation spearheaded by U.S. Sen. Bernie Sanders (I-VT) and other members of Congress.
Sanders called the details regarding the 21,000 emergency loans "jaw dropping."
"It's an opening, a lifting of the veil of secrecy," noted Sanders during a teleconference with reporters. "I hope out of this disclosure will come a lot more work to make the Fed and make the financial institutions more responsible to average Americans and small businesses."
Whether the information revealed by the Feds will lead to further disclosure of the central bank's' secretive ways is not yet clear, though Sanders did hint that he would pursue such action as this new information is examined.
Sanders' version of the "audit the Fed" bill was weaker than the one proposed by other Fed critics like Rep. Ron Paul (R-TX) and Rep. Alan Grayson (D-FL). Sanders backed off a full audit of the Federal Reserve after pressure from the White House. Instead, he settled for a one-time review of who the Fed gave money to during the financial crisis. The financial review was included in the Dodd-Frank financial overhaul bill signed into law in July by Pres. Barack Obama.
Though Sanders' compromise riled his allies, his standing as the "only socialist in the Senate" continues to capture the imagination of the national press corps.
The Wall Street Journal's preview of the Fed's release sported the headline: "A Glimpse at the Socialist Senator Who Fought the Fed."
In a separate story, The New York Times noted the largest recipient of the Fed's emergency loans was Citigroup, which was loaned $1.8 trillion, followed by Merrill Lynch, Bear Stearns and others. Even foreign banks were getting in on the Fed action, according to the documents.
The information detailing how the Feds provided $3 trillion in liquidity and another $9 trillion in short-term loans did provide new information, noted the Times.
"The disclosures, for example, revealed that the crisis in the market for commercial paper, the lifeblood of daily business, reached further into the economy and lasted longer than was previously known," the Times wrote.
For Sanders, the details also revealed that while taxpayers forked over trillions of dollars in zero- or low-interest loans — all of which were repaid — the Fed didn't ask financial institutions to ease up on lending restrictions or lower their credit card rates and fees.
"You have a working stiff bailing out a credit card company and in return is still being asked to pay 25 to 30 percent interest rates on his credit card," said Sanders. "For the person who's making $25,000 a year and is about to lose their house because they couldn't get a lower mortgage payment, yet we're giving money to companies that essentially shelved the money to help themselves, I think people wonder what the hell that is all about."
Sanders said he has no problem loaning out money to financial institutions, but in the future taxpayers should get more in return and the Fed should push these large firms to do more to help out average taxayers and small businesses. Aside from credit card rates being lowered, Sanders said the Fed could have forced large mortgage lenders to use some of the trillions of dollars to give temporary breaks to homeowners in trouble or loan money to small businesses who needed to help make payroll.
According to the Times story, several large corporations such as General Electric, Verizon and McDonald's all sought help from the Feds during the height of the financial crisis.
"How come we have the resources and will to bail out the largest financial institutions in the world while the middle class is collapsing?" Sanders added.
The disclosure of the Fed's loan portfolio, Sanders said, raised another troubling issue for the junior senator: "How many big banks repaid Treasury Department bailouts in order to avoid limits on executive compensation received no-strings attached loans from the Federal Reserve?"
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