As we said in Vol. 29 in our initial comments about the GAO audit of the Fed, “… we’re just scratching the surface.” There’s more.
On pages 3 and 4, for example, in addition to the “broad-based programs,” and in addition to the “currency swaps,” there have been hundreds of billions of dollars in Fed loans called “assistance to individual institutions.” This has included Bear Stearns, AIG, Citigroup, Bank of America, and “some primary dealers.” The Fed decided unilaterally who would receive this “assistance”, and who wouldn’t. The fix was in.
You may have read somewhere that all this money was paid back. It was in the headlines of your local newspaper, in fact, but it was a lie. On page 4 of the audit the GAO lists five Fed bailout programs that still have amounts outstanding, including $ 909, 000,000,000 (just under a trillion dollars) for the Fed’s Agency Mortgage-Backed Securities Purchase Program alone. That’s almost $ 3,000 for every living American.
On pages 13 and 14, in another example, the Fed had help bailing out Wall Street. On top of what the Fed was doing, there was the $ 700,000,000,000 TARP program authorized by Congress (our Congress!). Maybe you knew that, but did you know that the Federal Deposit Insurance Corp. (FDIC) also provided a federal guarantee for $ 600,000,000,000 in bonds issued by Wall Street?
You may have read also that these were riskless transactions, because the Fed would always have enough collateral to avoid losses. But that wasn’t true either. Pages 101 and 173 of the audit talk about the “Maiden Lane 1” bailout fund which was in the hole for almost two years.
All this is something very new. For the first 96 years of the Fed’s illegal existence, its primary market activities were restricted to changing the money supply by buying and/or selling U.S. Treasury bonds, and to lend at the “discount window”. Neither of these activities permitted the Fed to play favorites, but the programs that the GAO audited are fundamentally different. They allowed the Fed to stack the deck – to choose winners and losers.
Well, along with you, we were also among the losers. But imagine how things would have developed if we had just a small chunk of what the Fed and the government were slipping to their cronies. The $ 909,000,000,000.00, the $ 700,000,000,000.00, and the $ 600,000,000,000.00 mentioned above – and that’s only scratching the surface – amounted to more than two trillion dollars ($ 2,209,000,000,000).
Two trillion dollars would have allowed us to end this nation’s economic tailspin, and if this country saw a light at the end of the tunnel the whole world would have seen the end of it’s economic crises.
It could have been done by Executive Order, like the one FDR issued to end the Great Depression. That step would have revitalized our shipyards, our nation, and the rest of the world as well.