U.S. taxpayers paid $800 billion in 2009 to bail out huge financial institutions caught up in the sub prime mess they created and voters have been complaining about it ever since. But there was a bigger, broader bailout we didn't even know about.
Thanks to a provision forced into the Dodd-Frank financial regulation bill by Congress members from the extreme ends of their party - libertarian Republican Ron Paul and liberal Democrat Alan Grayson in the House, tea party favorite Jim DeMint and Independent socialist Bernie Sanders in the Senate - the Government Accounting Office has completed its first-ever audit of the Federal Reserve.
What the GAO found was that the Fed gave more than $16 trillion in assistance, mostly in the form of zero-interest loans, to some of the biggest financial institutions and corporations, not just in the United States but around the world. For purposes of comparison, $16 trillion is about $1.5 trillion more than the gross domestic product (GDP) of the U.S.
In addition to the largest U.S. banks, recipients of the Fed's largesse include the European Central Bank, which received over $8 trillion, banks in Brazil, Canada, Scandinavia, even $26 billion for an Arab intermediary for the Central Bank of Libya. Corporations receiving assistance include such familiar names as General Electric and Toyota.
The Fed's actions illustrate the global nature of the financial industry and of the financial crisis that erupted in 2008. But while capital is globalized, the Fed is part of the U.S. government - at least in theory. Sanders argues that "no agency of the United States government should be allowed to bail out a foreign bank or corporation without the direct approval of Congress and the president."
The GAO report found most of the safeguards against corruption at the Fed to be adequate, but noted that conflicts of interest are inevitable. The CEO of banking giant JP Morgan Chase, for example, held a seat on the New York Fed's board of directors when the Fed gave more than $390 billion to his bank.
Sanders argues that "this is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else." If nothing else, it is an argument for greater transparency and oversight at the Federal Reserve.
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