End the Bankers' $3.3-Trillion Free Ride: Bust 'Em Up and Take 'Em Down!
Let’s just assume for the sake of argument--though I believe the claim to have been completely bogus--that the Federal Reserve and the US Treasury and all of the Bush and Obama economic advisers and Congressional leaders in late 2008 and early 2009 genuinely feared that shutting down and breaking up the nation’s biggest banks would lead to financial and economic disaster because of the extent of the fiscal crisis caused by the implosion of subprime-linked structured products.
We now know, thanks to an amendment to the Dodd-Frank financial “reform” law introduced by Sen. Bernie Sanders (I-VT), that the Fed made available a stunning $3.3 trillion in emergency lending, at extraordinarily low interest rates ranging as low as 0.5%.
But this information was withheld from both Congress and the public by the Fed and the Treasury until this past week! There was no legal reason for it to be withheld. It was our money, and in an excellent article by Gretchen Morgenson of the New York Times, Walker F. Todd, a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland who now works as a research fellow at the American Institute for Economic Research, says the information about the amount of the emergency lending, and who was receiving the money should have been made available long before the Dodd-Frank legislation was drawn up.
As Todd tells Morgenson, “The Fed’s current set of powers and the shape of the Dodd-Frank bill over all might have looked quite different if this information had been made public during the debate on the bill.”
Boy is that an understatement.
Dodd-Frank was written within the constraints--huge and debilitating--of the concept of “too big to fail.” There was absolutely no consideration given during the drawing up of the bill to hacking apart Citibank, Bank of America, Wells Fargo, JPMorganChase or Goldman Sachs. Nor was any consideration given to requiring these big banks, which are responsible collectively for more than half of all foreclosures nationwide, and which have the huge majority of credit cards, on which Americans are struggling with long-term balances carrying loan-shark rates in excess of 20%, to cut their customers some slack.
If the American public had known a year and a half ago that the same banks that were turning the screws on them were receiving $3.3 trillion in subsidized loans, there would have been a massive clamor to demand that as a condition of those loans, deals be cut to reduce mortgages to accurately reflect the depreciated value of the homes in question, and to reduce the monthly payments people owed. There would have been a clamor to restrict the interest rate that banks could charge on card balances. Questions would have been asked about why these banks, that clearly couldn’t survive on their own without taxpayer support, were being allowed not only to continue to exist, but to actually get larger.