It’s Time to Audit the NY Fed

The time has come to pry loose from all of the missing details of its crisis era deals.

By Pam Martens and Russ Martens of Wall Street on Parade.

On July 21, 2011 the investigative arm of Congress, the Government Accountability Office (GAO), released the first-ever government audit of the Federal Reserve in its 98-year history. The audit came about as a result of the determined efforts of Senator Bernie Sanders to force transparency on the secretive Wall Street bailout actions of the Federal Reserve during the 2008 financial crash and the years that followed. Sanders successfully tacked an amendment on the Dodd-Frank financial reform legislation of 2010 that mandated a top-to-bottom audit of how much the Fed had spent on its bailout and the financial institutions to whom it went.

Sanders issued a statement saying this on the day the findings were released:

“The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression…The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo.  The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.”

In effect, the Federal Reserve bailout was conceived by Wall Street and run by Wall Street for its own benefit and controlled behind a dark curtain at the Federal Reserve Bank of New York. After Bloomberg News had won at both the Federal District Court and Appellate Court to have some of the Fed’s lending data released to the public, the very banks that the Fed was bailing out with trillions of dollars in revolving, secret loans (Bank of America, JPMorgan Chase, Citigroup and Wells Fargo) formed a consortium called The Clearinghouse Association LLC, and filed an appeal with the U.S. Supreme Court to stop the release of the data. The Supreme Court declined to hear the appeal and the Fed was forced to release some of the information in 2010.

But even after the GAO released its audit in 2011 showing that the Fed had sluiced over $16 trillion to a hodgepodge of Wall Street banks, foreign banks and hedge funds, there was still plenty of secrecy

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