Bloomberg has won a lengthy Freedom of Inforn battle to get the details of a secretive, no-strings-attached multi-trillion-dollar payout from the Bush administration (continued by the Obama administration) to banks, the details of which were not available to Congress. The documents make it clear that the banks' posture that they were only borrowing the money to help the government (JP Morgan said it borrowed "at the request of the Federal Reserve to help motivate others to use the system") were purest refined BS. Morgan for example, had borrowed twice its cash holdings.
The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma -- investors and counterparties would shun firms that used the central bank as lender of last resort -- and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing...”
Lawmakers knew none of this.
They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.
Matt Taibbi, the Rolling Stone columnist who has produced better coverage of Wall Street corruption and government collusion than just about anyone, has a list of suggested demands for the Occupy Wall Street movement; as you'd expect from Taibbi, they're informed, uncompromising, and bang on target:
1. Break up the monopolies. The so-called "Too Big to Fail" financial companies – now sometimes called by the more accurate term "Systemically Dangerous Institutions" – are a direct threat to national security. They are above the law and above market consequence, making them more dangerous and unaccountable than a thousand mafias combined. There are about 20 such firms in America, and they need to be dismantled; a good start would be to repeal the Gramm-Leach-Bliley Act and mandate the separation of insurance companies, investment banks and commercial banks.
2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about. It would also deter the endless chase for instant profits through computerized insider-trading schemes like High Frequency Trading, and force Wall Street to go back to the job it's supposed to be doing, i.e., making sober investments in job-creating businesses and watching them grow.
3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer's own money to lobby against him. You can either suck on the public teat or influence the next presidential race, but you can't do both. Butt out for once and let the people choose the next president and Congress.
(Image: Day 8 Occupy Wall Street September 24 2011 Shankbone, a Creative Commons Attribution (2.0) image from shankbone's photostream)