Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts

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Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts

Posted by Paul Krugman on July 21st, 2011

The first ever GAO(Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit would not be carried out. Ben Bernanke(pictured to the left), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning:  http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

What was revealed in the audit was startling: $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious — the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.

To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.

In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.

“This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.” – Bernie Sanders(I-VT)

When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self identified Democratic socialists like Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.

Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin air and give it out to megabanks and supercorporations like Halloween candy. If the Federal Reserve and the bankers who control it believe that they can continue to devalue the savings of Americans and continue to destroy the US economy, they will have to face the realization that their trillion dollar printing presses will eventually plunder the world economy.

The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places

View the 266-page GAO audit of the Federal Reserve(July 21st, 2011):http://www.scribd.com/doc/60553686/GAO-Fed-Investigation

Source: http://www.gao.gov/products/GAO-11-696
FULL PDF on GAO server: http://www.gao.gov/new.items/d11696.pdf
Senator Sander’s Article: http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

Krugman responds to Obama staffer's bashing

Hippie Punching

Via Greg Sargent, I learn that some people in the Obama campaign really, really dislike people like me, who complain when the president gives in to GOP blackmail.

Well, at least they’re paying attention.

I would say this: on one side you have the GOP, which responds to completely crazed Tea Party demands by doing all it can to assure the hard right that it’s on its side. On the other, you have the Democratic 
establishment or at least part thereof, which responds to complaints from its own base that it’s going too easy on the crazies by lashing out at the base, with a bit of bearded-professor bashing on the side.

Way to strengthen your bargaining position, guys.

Countdown with Keith Olbermann 08-03-2011 1a - Jobs Hunter, with Paul Krugman

The President Surrenders

The President Surrenders
By PAUL KRUGMAN
July 31, 2011


A deal to raise the federal debt ceiling is in the works. If it goes
through, many commentators will declare that disaster was avoided. But
they will be wrong.

For the deal itself, given the available information, is a disaster,
and not just for President Obama and his party. It will damage an
already depressed economy; it will probably make America’s long-run
deficit problem worse, not better; and most important, by
demonstrating that raw extortion works and carries no political cost,
it will take America a long way down the road to banana-republic
status.

Start with the economics. We currently have a deeply depressed
economy. We will almost certainly continue to have a depressed economy
all through next year. And we will probably have a depressed economy
through 2013 as well, if not beyond.

The worst thing you can do in these circumstances is slash government
spending, since that will depress the economy even further. Pay no
attention to those who invoke the confidence fairy, claiming that
tough action on the budget will reassure businesses and consumers,
leading them to spend more. It doesn’t work that way, a fact confirmed
by many studies of the historical record.

Indeed, slashing spending while the economy is depressed won’t even
help the budget situation much, and might well make it worse. On one
side, interest rates on federal borrowing are currently very low, so
spending cuts now will do little to reduce future interest costs. On
the other side, making the economy weaker now will also hurt its
long-run prospects, which will in turn reduce future revenue. So those
demanding spending cuts now are like medieval doctors who treated the
sick by bleeding them, and thereby made them even sicker.
And then there are the reported terms of the deal, which amount to an
abject surrender on the part of the president. First, there will be
big spending cuts, with no increase in revenue. Then a panel will make
recommendations for further deficit reduction — and if these
recommendations aren’t accepted, there will be more spending cuts.
Republicans will supposedly have an incentive to make concessions the
next time around, because defense spending will be among the areas
cut. But the G.O.P. has just demonstrated its willingness to risk
financial collapse unless it gets everything its most extreme members
want. Why expect it to be more reasonable in the next round?
In fact, Republicans will surely be emboldened by the way Mr. Obama
keeps folding in the face of their threats. He surrendered last
December, extending all the Bush tax cuts; he surrendered in the
spring when they threatened to shut down the government; and he has
now surrendered on a grand scale to raw extortion over the debt
ceiling. Maybe it’s just me, but I see a pattern here.

Did the president have any alternative this time around? Yes.

First of all, he could and should have demanded an increase in the
debt ceiling back in December. When asked why he didn’t, he replied
that he was sure that Republicans would act responsibly. Great call.
And even now, the Obama administration could have resorted to legal
maneuvering to sidestep the debt ceiling, using any of several
options. In ordinary circumstances, this might have been an extreme
step. But faced with the reality of what is happening, namely raw
extortion on the part of a party that, after all, only controls one
house of Congress, it would have been totally justifiable.

At the very least, Mr. Obama could have used the possibility of a
legal end run to strengthen his bargaining position. Instead, however,
he ruled all such options out from the beginning.

But wouldn’t taking a tough stance have worried markets? Probably not.
In fact, if I were an investor I would be reassured, not dismayed, by
a demonstration that the president is willing and able to stand up to
blackmail on the part of right-wing extremists. Instead, he has chosen
to demonstrate the opposite.

Make no mistake about it, what we’re witnessing here is a catastrophe
on multiple levels.

It is, of course, a political catastrophe for Democrats, who just a
few weeks ago seemed to have Republicans on the run over their plan to
dismantle Medicare; now Mr. Obama has thrown all that away. And the
damage isn’t over: there will be more choke points where Republicans
can threaten to create a crisis unless the president surrenders, and
they can now act with the confident expectation that he will.
In the long run, however, Democrats won’t be the only losers. What
Republicans have just gotten away with calls our whole system of
government into question. After all, how can American democracy work
if whichever party is most prepared to be ruthless, to threaten the
nation’s economic security, gets to dictate policy? And the answer is,
maybe it can’t.

Krugman: US Debt, GDP v. Greece #austerity issue

July 17, 2011, 2:32 PM

Get Them From The Greeks

I’ve complained a lot about the Hellenization of our economic discourse — the insistence, in the teeth of evidence, that America is just like Greece in budget terms. Now comes Lindsey Graham to promote the fallacy. So let’s talk, again, about why it’s nonsense.

Here are net debt levels as a percentage of GDP; source here. Just to forestall the objections, these reflect all levels of government, not just federal:

So the US has much less debt than Greece. Also worth noting is the pattern over time. Greece ran up debt relative to GDP at a fairly good clip even during good times, while the United States — despite the Bush administration’s best efforts — did not. So America does not have a comparable record of sustained fiscal irresponsibility; we’ve only developed large deficits in response to the crisis, which happens to be exactly when we should be running large deficits.

And that’s not even to get into the issue of us having our own currency.

One more thing: even if you believe, despite all this evidence, that we resemble Greece, what does that say? Fiscal austerity in the face of a depressed economy does little to improve your long-run debt position, and may even hurt it. One thing the advocates of austerity never mention is that it isn’t working anywhere right now. Remember how Ireland’s early and savage turn to austerity was supposed to reassure markets and bring borrowing costs down?

Steve Benen has it right here:

If Graham sincerely believes his own rhetoric, he has no idea what he’s talking about. If Graham is just playing some kind of cynical game, he’s a hack.

I vote for both.