There is a valuable lesson to be learned from the Board of Governors of the Federal’s announcement on Wednesday about how much they actually spent on bailing out both American and foreign financial institution. Don’t believe everything you read on Wikipedia. If you google the term “bailout,” an entry from Wikipedia comes up. In the entry (here), the author cites a statistic from the World Bank stating “In 2002, World Bank reported that country bailouts cost an average of 13% of GDP.” That is technically true but apparently the cowboys at the Fed didn’t get the memo.
The Fed’s bill for the bailout came out to 3.3 trillion dollars, representing 23% of the nation’s Gross Domestic Product and included 21,000 transactions. An interesting side note—the Fed didn’t actually mention how much it cost in the press release they issued following the report. The money is in addition to the $700 billion bailout issued by the Troubled Asset Relief Program, bringing the total cost of the bailout and loans to 28% of U.S. GDP. On December 3, the World Socialist Website covered the report's release (here), finding that Goldman Sachs borrowed money from the fund 84 times and Merrill Lynch 226 times. In addition, the Financial Times revealed (here) that the Fed used the money to assist foreign banks such as Barclays Capital and Bloomberg reported (here) that the Fed used to money to help General Electric Co. and McDonald’s Corp. No wonder op-ed columns and blogs are lauding Sen. Bernie Sanders, an Independent from Vermont for his efforts to get the an amendment into Dodd-Frank requiring the Fed to disclose the amount of money it lent to these corporations.
In a column for the WSJ.com, “A Glimpse at the Socialist Senator Who Fought the Fed,” (here), Maya Jackson Randell detailed the senator’s fight to get the amendment into the final draft of the act and wrote “The Senate's lone socialist, led a fight against the powerful U.S. Federal Reserve and won, forcing the central bank to disclose more details than ever on its rescue actions during the financial crisis.” She went on to say he was “vocal and persistent” in his fight and plans to continue to push for investigation into the Fed’s actions.
Sanders, himself , in a blog appearing (here) in the Huffington Post, said that he had questioned Ben Bernanke at a 2009 Senate hearing about the Fed’s spending and was refused. After using Dodd-Frank to force an answer, Sanders said in the post “We have begun to lift the veil of secrecy at the Fed, and the American people now have this information… this is a major victory for the American taxpayer and for transparency in government.” This amendment is a win for Dodd-Frank in that it effectively forced the Fed to reveal this information. There is no reason a government agency should be allowed to keep the spending of a single taxpayer dollar a secret. Ever. Perhaps in the case of national security, exact details in transactions should be withheld but never the dollar amount. And national security is not the issue here.
Sanders is a hero for doing what few dare to do—which is to stand up to the Fed. Is the Fed going to continue to do whatever they feel like doing? Of course. It is actually part of their job and they are not always wrong in taking the actions they take. Yes, we need a strong federal agency capable of making financial decisions in the time of crisis. Subject to intense lobbying and voter pressure, Congress is too slow. But there is no excuse not to detail $3.3 trillion dollars in loans, especially when some of that money is going to foreign institutions. Further investigation will reveal whether or not all of these loans were made wisely and whether or not we will be able to recoup taxpayer dollars. But this investigation would not occur if this information had not been released to the government officials responsible for such investigations. Again, while Dodd-Frank may fail at a lot of things, transparency is not one of them. The real question is why isn’t transparency a fact of life in government proceedings?
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