The Federal Reserve could oversee an economic recovery or a once-in-a-century heist. It has the power to choose.
By Zach Carter and cross-posted from Huffington Post.
The coronavirus rescue package that Congress approved in late March authorized the Federal Reserve to issue up to $4.5 trillion in emergency lending to help stabilize the economy.
That sounds like a lot of money because it is. But the economy is collapsing, and even this amount will likely prove insufficient to right the ship. The Fed issued $9 trillion in emergency loans during the Great Recession, and U.S. unemployment has already eclipsed its peak from the prior crisis in just a few short weeks.
The problem is not the amount of money the Fed has been authorized to spend ― it’s that the emergency lending programs the Fed has unveiled to date are not a rescue, but a license to steal.
Nobody at the Fed or Congress has placed meaningful restrictions on how the largest corporations can use their bailout money. They can funnel it to shareholders in the form of stock buybacks or dividends. They can raise executive pay, approve massive bonuses for Wall Street traders, buy up smaller competitors ― all while laying off workers, slashing salaries, offshoring jobs or otherwise running amok as corporate citizens.
We have every reason to believe that companies can and will do these things because that’s exactly what they did the last time the Fed and Congress came together to funnel trillions of dollars to giant corporations. The Fed began emergency lending operations in December 2007, but buybacks and dividends from large banks did not halt until 2009.
AIG paid out a massive dividend to its shareholders after the company was effectively nationalized by the Fed in the most aggressive use of its emergency powers during the crisis. The insurance giant then proceeded to pay $450 million in bonuses to its “top performers” after the public had bailed AIG out.
As big banks funneled huge sums to their top ranks, the tellers, processors and other less-glamorous employees got pink slips.
What’s worse, the anything-goes mentality at the Fed, Congress and the Bush and Obama White Houses effectively transformed the culture of American high finance into that of a criminal syndicate. JPMorgan Chase agreed to no fewer than 52 settlements totaling $28.8 billion with state and federal officials over the decade following the crisis ― for everything from bribing Chinese government officials to violating economic sanctions against Iran, Cuba and Sudan to rigging interest rates, manipulating energy markets, ripping off or bribing local governments, retaliating against a whistleblower and deceiving regulators about trading data…