Back in 2008, Mark Pittman of Bloomberg News was suspicious of Federal Reserve activity, vis-a-vis, making loans to banks with little or no collateral, or collateral of a suspect nature, and sued in Federal Circuit Court to force the Fed to reveal its lending procedures in what was called the Troubled Assets Relief Program (TARP). It wasn’t until late this summer that a decision was made in his favor and the Fed was forced to reveal that not only had they made almost a trillion dollars in poorly collateralized loans during TARP, but by last month, they had loaned an additional $7.7 trillion to big banks, all of it unreported and off-budget. Yep, that’s right $7.7 trillion with a T.
Considering the amount of heat and smoke generated in the media in the days that followed Congress’ approving TARP, it is hard to reconcile the fact that the news of the off-the-books deal eleven times larger, went almost unreported. As usual, it was Comedy Central’s Jon Stewart who dragged this story into the light of day. Stewart called the Fed, “the world’s dumbest loan-shark” when he ran a clip showing that not only had the Fed loaned Wall Street money at a .01 percent interest rate, the banks in turn used the money, for the most part, to buy government bonds that paid at a rate just above three percent. So, on your behalf, the government loaned Wall Street money for free and then paid Wall Street interest to borrow the money back.
One of the most disturbing aspects of this wholly unreported story is the fact that the Fed failed to report these “loans” to Congress, even as Congress crafted the Dodd-Frank Wall Street Reform and Consumer Protection Act. Had they known about the lending, Congress might not have housed a newly created “watchdog” agency within the Fed itself, which, in light of the Feds’ reckless and secretive lending, is bitterly ironic.
Despite the Feds’ complete lack of transparency regarding these “loans” and the pure idiocy of giving money to businesses and then borrowing it back from them at interest, no one is going to jail over this. There has been no call for an investigation and a surprising lack of reaction in the press. The Feds’ action in this case is indefensible and inexplicable, unless the explanation is corruption. And “corrupt” and “unconstitutional” are both words frequently used by GOP Presidential Candidate Ron Paul to describe the institution.
The freedom to conduct business in America is a right, but no business has the right to plunder the public coffers at the same time that our elected officials are taking an axe to national and social security and proposing new taxes.
With all of this in mind, in the forthcoming months when we hear about the Department of Defense being gutted and other government services being cut, it will become more and more difficult to listen to anyone in Washington telling us we need to either tighten our belts, pay more taxes, or do both, because those who have benefitted from the Feds largesse will be doing neither.