The Fed has finally came clean. It now admits it bailed out Bear Stearns – taking on tens of billions of dollars of the bank’s bad loans – in order to smooth Bear Stearns’ takeover by JPMorgan Chase. The secret Fed bailout came months before Congress authorized the government to spend up to $700 billion of taxpayer dollars bailing out the banks, even months before Lehman Brothers collapsed. The Fed also took on billions of dollars worth of AIG securities, also before the official government-sanctioned bailout.He is awfully generous to say this puts the "Fed in hot water". The honest way to put it: this was a crime, a malfeasance in office, where officials exceeded their authority. Funny, this came from the very administration that argued for "limited" government, for "small" government.
The losses from those deals still total tens of billions, and taxpayers are ultimately on the hook. But the public never knew. There was no congressional oversight. It was all done behind closed doors. And the New York Fed – then run by Tim Geithner – was very much in the center of the action.
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The Fed has a big problem. It acts in secret. That makes it an odd duck in a democracy. As long as it’s merely setting interest rates, its secrecy and political independence can be justified. But once it departs from that role and begins putting billions of dollars of taxpayer money at risk — choosing winners and losers in the capitalist system — its legitimacy is questionable.
That it chose to reveal the truth about its activities during a week when Congress is out of town, when much of official Washington and the Washington media have gone on vacation, and only after several federal courts have held that the Fed must release documents related to its bailout of Bear Stearns, suggests it would rather remain secret than become transparent.
But I guess when it comes to bailing out your business buddies, all that posturing about "theories of government" mean nothing. Money speaks louder than "principles".
What bugs me is that Timothy Geithner is still in power. Obama appointed him as a favour to the big Wall Street donors. The honest way to put it: Obama was bought by money.
2 comments:
Didn't Obama receive record amounts in campaign contributions? We need desperately to change campaign finances along with finance regulation. We have a really strange system in this country and it is because of the people who have control of politics and government. They hardly have to hide the bribery anymore if they ever did.
Thomas: You can see for yourself what each presidential candidate got by using this page.
You can see how much the banks gave in political contributions using this page.
Nose around the OpenSecrets.org site to learn more about who's buying whom in the political races.
The raw data is there, but it isn't always sliced & diced the way you might want it. So I find it useful to read investigative journalists who have the courage to name names. I enjoyed I. F. Stone back in the 1960s. In the 1990s and early 2000s, I was an avid reader of Molly Ivins. These days I follow Paul Krugman closely. These journalists help you cut through the crap and understand what is going on behind the smoke and mirrors. You need to find those writers who can give you the viewpoints you need to understand things.
There has always been bribery and corruption in American politics, but the country struggles on. That's why I pointed you at Mr. Smith Goes to Washington. It is a "feel good" Hollywood film about how political corruption is overcome. It is good because it points out there is corruption. And it is good because it sends the message that sometimes the good guys can win. It is misleading in its "Hollywood ending". In the real world there are seldom clear winners and losers and nothing is cleanly resolved. We all just muddle on through life doing the best we can.
The election of Obama is a case in point. This was a great step forward. But Obama has proved to be more middle-of-the-road conservative than many expected (including me). Instead of triumphantly leading us out of the morass of the Bush years he is timidly leading people in a better direction while doing things that are suspicious (like not reforming the financial system). Life is complex. Roll with the punches, but keep dusting yourself off and get back into the fight.
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