Friday, July 22, 2011
Bailout $16 trillion more than we knew, and unnecessary to boot?
by Larry Geller
Recent revelations suggest that not only was the bank bailout probably unnecessary to protect the US economy, our government gave their buddies and campaign contributors far more than was ever made public. Like, $16 trillion more. And that staggering sum was not limited to US banks.
And now Congress, with the cooperation of President Barack (“Cat Food”) Obama, is trying to squeeze seniors and those in most need of their hard-earned benefits and tax deductions while further expanding tax deductions for the rich.
Independent Senator Bernie Sanders, through an amendment he wrote a year ago, obtained an audit that discovered:
"As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."
Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.
[Bernie Sanders, The Fed Audit, 7/21/2011]
As to the revelation that the bank bailouts may not have been necessary at all, here is a snip from today’s Democracy Now interview with Michael Hudson, president of the Institute for the Study of Long-Term Economic Trends:
MICHAEL HUDSON: If you’re talking about the revelations of the senator, these are the second big story to come out in the last two weeks. The first story, really, was two weeks ago when Sheila Bair finished her five-year term at the Federal Deposit Insurance Corporation. And now that she left, she was able to talk about the arguments that were going on while all of this money was being given away. She opposed it. She said none of this money, not a penny, had to be given away at all. She said the job of the FDIC was to do exactly what it did with Washington Mutual and IndyMac. She said they could have closed down Citibank, they could have closed down AIG and the others. Depositors insured by the FDIC wouldn’t have lost a penny. She said, "That’s what the FDIC does."
She was overruled by Geithner and by the Treasury Department, and especially by Bernanke, who essentially said, "We have to save the rich first. We have to save the gamblers." There was plenty of money in all of the banks to cover all of the retail vanilla deposits for businesses, families. What there was not money for was for all the cross-gambles that they had made on derivatives—that is, which way interest rates would go, which way currencies would go. And so, this was really a casino. These were bets. And people like the AIG couldn’t pay. And the question is, how are you going to get the winners in this casino to get money from the losers, who are broke? So these $16 trillion worth of loans were all for junk securities. They weren’t for the solid securities that did back out the deposits. These were all for junk gambles, having nothing to do with the real economy at all.
[Democracy Now, Pushing Crisis: GOP Cries Wolf on Debt Ceiling in Order to Impose Radical Pro-Rich Agenda, 7/22/2011]
Sanders completely misunderstands the report. If you read the first page the report clearly states that the peak dollar amount outstanding during the period was $1 trillion. Moreover, it was not secret, and the loans were repaid with interest. Read the report.