Print This Post Print This Post

Senate Votes 96-0 To Audit Fed, Reveal Who Got Bailouts

federalreservepic

Tuesday, May 11, 2010
By David Lightman

WASHINGTON — The Senate voted 96-0 Tuesday to authorize a congressional audit of the secretive Federal Reserve Board’s emergency aid program and full disclosure of who got the money, a plan that could reveal more details about government help for embattled investment firm Goldman Sachs.

“We are on the verge of lifting the veil of secrecy on perhaps the most important government agency in the United States of America,” said independent Vermont Sen. Bernard Sanders, the proposal’s chief sponsor, “an agency which has control and spends trillions of dollars. They do it behind closed doors.”

Under his plan, Congress’ Government Accountability Office would conduct “a top to bottom audit of all the Federal Reserve’s emergency activities” since the economic crisis began in December 2007. The Fed also would have to post on its website all recipients of money from the more than $2 trillion in emergency aid will that’s been disbursed since then.

The GAO also would look into whether the financial deals involved conflicts of interest. It’s common for members of the board of directors of the powerful Federal Reserve Bank of New York, for example, also to be executives or directors at banks that got government bailout money.

The Fed also is locked in a court fight over a Freedom of Information Act suit to force it to identify all institutions that secretly got rescue money.

“I want to know, and I think the American people want to know, how much these financial institutions received from the Fed and if this represents a conflict of interest,” Sanders said.

The White House and Fed Chairman Ben Bernanke had pushed hard to thwart the Fed audit, saying it would compromise its independence. They relented after it was clear that Sanders had the votes and he agreed to two changes.

One would delay the Web posting until Dec. 1, instead of 30 days after enactment, and the audit would be done only once.

The auditors also wouldn’t be allowed to probe how the Fed sets interest rates or monetary policy, its central power for managing the economy.

The audit is the latest Senate change to legislation that would overhaul the nation’s financial regulatory system, making it easier for the government to break up ailing banks and providing a strong, independent consumer agency to help people with credit questions and problems.

The Senate debate is in its second week, with Democratic leaders hoping for a final vote later this week. If the measure passes, it would be reconciled with a similar bill that the House of Representatives passed last year. The merged measure then would require passage from both houses of Congress before it could be enacted into law, which is unlikely before June at the earliest.

The new audit and disclosure rules, Sanders hoped, could reveal more details about the Fed’s dealing with firms such as Goldman Sachs.

“I want to know, and I think the American people want to know, why Lloyd Blankfein” — Goldman’s chief executive — “attended a meeting at the New York Fed when the federal government decided to bail out AIG to the eventual tune of $182 billion,” Sanders said, “allowing Goldman Sachs to pocket $13 billion of that money.”

Goldman got the most money of any U.S. bank — $12.9 billion — from the rescue of insurance giant American International Group. Henry Paulson, a former Goldman chief executive officer, was the treasury secretary at the time and brought in other former Goldman execs to manage the rescue. Goldman says that neither Blankfein nor any of its executives played a role in the AIG bailout decisions.

While the New York Fed never provided a list of counterparties, the special inspector general who’s monitoring the Troubled Asset Relief Program has listed the large counterparties, as has AIG. In getting paid 100 cents on the dollar, the banks got to take the risky securities off their books and, effectively, hand them over to the New York Fed.

The New York Fed maintains that it’s now several billion dollars ahead on the deal because the securities are regaining value.

A bid to conduct a wider audit failed 62-37 Tuesday.

ARTICLE CAN BE FOUND HERE.

——————————————–

Did you like what you read here? If so, please be kind enough to donate to support the cause (click HERE). It takes time and money to create a website like this and I love doing it so anything would be very much appreciated. And I’ll personally email you a free thank-you gift in returnmy 214 page ebook about debt, credit, bankruptcy, investing and much more!

BBS Radio. There are no equals! Get Archive Access Now

Related Articles:

Share

Filed Under: FeaturedHeadlinesNews Articles

Tags: , , , ,

Leave a Reply

You must be logged in to post a comment.

Page optimized by WP Minify WordPress Plugin