Bottom Line on Fed Bailout is No Secret

Were the bankers and Federal Reserve trying to hide something in particular? Or were they just fighting Bloomberg’s lawsuit to reveal the details of the Fed’s sweetheart bailout loans out of habitual arrogance?

I’ve been wondering about this as I make my way through Bloomberg’s expose based on the data the news service forced the Fed to turn over after several years of litigation.

The Fed and the banks tried to scare the courts into keeping the data secret, warning that disclosure would stigmatize those who received the low interest loans and cause them irreparable harm.

Finally, the courts saw through all the Fed’s and the bank’s bogus arguments and ordered the data made public.

The numbers are all so mind-bogglingly huge that it’s easy to be overwhelmed, for the information to lose it’s meaning. But as Columbia Journalism Review’s The Audit pointed out, Bloomberg went straight to the heart of the issue, reminding us what kind of a bailout our politicians delivered, in which banks and other corporations got access to $1.2 trillion in low-interest loans – about the same amount U.S. homeowners are struggling with on 6.5 million delinquent or foreclosed mortgages.

But as RJ Eskow reminds us, we knew a lot of the grisly details before the latest data dump – like that the 10 largest banks got $667 billion in low-interest loans from the Fed.

What we didn’t know until now is how much of that money was an outright gift from taxpayers; Eskow estimates that it amounts to about $27 million on each $1 billion worth of loan, based on the difference between the usual 3.8 percent interest rate and the 1.1 sweetheart rate the Fed charged as part of its bailout. Because the Fed attached no strings to its generosity to the banks, the bankers never paid it forward to the rest of us, who saw our access to credit shrink. And it never occurred to the Fed that it might have stimulated the economy with a few well-placed low-interest loans to the rest of us.

The bottom line is that the Fed shouldn’t be handing out trillions of dollars without any accountability or transparency. Most Americans are not going to have wade through the details to confirm their gut feeling – we’re getting screwed.

D.C. Disconnect: Beltway Media Edition

The historic first ever Federal Reserve press conference delivered even less than the little that was expected.

That was in part because Fed chair Bernanke is good at making economic policy boring and opaque.

After all, that is his job.

But the reporters who cover the Fed have no such excuse.

At the press conference, they shared none of the outrage that continues to be expressed by the rabble outside Washington who are upset by the Fed’s bailout of big banks, and who fought to make the agency more transparent.

The whole thing had the flavor of a rote exercise, featuring people who appeared to be sleepwalking rather than covering the secretive agency that handed out trillions to the financial industry with no questions asked.

There was no skepticism, no appearance that the reporters had done their homework to challenge the Fed’s behavior in boosting banks while abandoning working people. There was none of the excitement that reporters worked up for the non-story of Obama’s birth certificate.

The press conference confirmed what we already knew: federal authorities, including Bernanke have abandoned the unemployed. They’ve moved on. Although employment is one of two of Bernanke’s mandates, he insists his hands are tied.

The reporters participating in this historic occasion treated the bailout as old news. Somehow they managed to miss that every time the Fed provides information about its actions in the bailout, it raises more questions than it answers.

Thankfully, not everybody in Washington shares this view. Sen. Bernie Sanders, the independent socialist from Vermont who caucuses with the Democrats, has been doing his best to dog the Fed.

A day before Bernanke held his press conference; Sanders released the results of a study he ordered from the Congressional Research Service of the Fed’s secret lending program. That study showed how the big banks gamed the bailout, profiting from investing the low interest loans the Fed gave them rather than loaning the money to businesses to get the economy going.

Sanders put out a press release with a catchy headline –  “Banks Play Shell Game With Taxpayer Dollars.” This wasn’t enough to rouse the reporters who cover the Fed; nobody could be bothered to ask Bernanke about it as his press conference. According to the research service, the banks pocketed interest rates 12 percent greater than the low-interest emergency loans the Fed was giving them. The purpose of this emergency loan program had nothing to do with enriching bankers; it was justified only because we were told it was the only thing that would get the economy going.

It’s worth remembering that Bernanke and the Fed fought a losing battle against the release of any details about its secret lending program. You would have thought the reporters would have welcomed the opportunity to subject Bernanke’s decision-making to public scrutiny.

 

 

 

 

 

The President's Odd Jobs Choice

About the only the job that Jeffrey Immelt would be less qualified for than jobs czar would be to lead a crackdown on the influence of big money lobbyists.

Oh wait- there is no crackdown on lobbying.

So Immelt, the CEO of General Electric, will have to make do with the job the president has given him as head of the administration’s reconfigured outside economic advisory council, which is supposed to focus on job creation.

I’ve written before about G.E. as a prime example of how major corporations benefited from the bailout without exhibiting any gratitude to taxpayers.

To say that Immelt is a weird choice for a job creation initiative is an understatement.

Under Immelt’s stewardship, G.E. has shredded thousands of jobs in the U.S. while outsourcing many jobs to India and China. In the years before the financial collapse, G.E. focused on building up its enormous credit operation, which melted down under the weight of bad loans along with the rest of the financial sector. If not for the generosity of taxpayers, who gave G.E. more than  $16 billion in low-interest loans to keep it afloat, Immelt himself probably wouldn’t have a job. In 2008, Forbes named Immelt one of the U.S. most overpaid executives.

His company has engaged in economic blackmail, threatening the state of Massachusetts that G.E. would close plants if state officials didn’t cough up tax breaks. It’s true that Immelt’s GE has embraced green technology – but only wherever there is a substantial government subsidy involved.

Meanwhile, GE is spending more than any other firm on lobbying, while it pays little or no taxes.

If Immelt has had any previous innovative ideas about substantially reducing unemployment, he’s kept them to himself. This is the person our president chooses to lead his jobs effort? For Immelt and other corporate and financial titans, the “too big to fail” bubble has never really burst. They’re continuing to rake in profits and shape government policies in their own interests, while the majority who don’t have access to power are shut out from financial security as well as political influence. Rather than challenging this unequal equation, our president has chosen to try to climb into the bubble himself.