Yesterday, the House Financial Services Committee released its hearing schedule for October. There is not a peep about holding a hearing on the unprecedented hundreds of billions of dollars that the Federal Reserve Bank of New York is pumping into unnamed banks on Wall Street at a time when there is no public acknowledgement of any kind of financial crisis taking place.
Congressional committees should have been instantly on top of the Fed’s actions when they first started on September 17 because the Fed had gone completely rogue from 2007 to 2010 in funneling an unfathomable $29 trillion in revolving loans to Wall Street and global banks without authority or even awareness from Congress. The Fed also fought a multi-year court battle with the media in an effort to keep its giant money funnel a secret.
According to Section 1101 of the Dodd-Frank financial reform legislation of 2010, both the House Financial Services Committee and the Senate Banking Committee are to be briefed on any emergency loans made by the Fed, including the names of the banks doing the borrowing. The section reads:
“The [Federal Reserve] Board shall provide to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, (i) not later than 7 days after the Board authorizes any loan or other financial assistance under this paragraph, a report that includes (I) the justification for the exercise of authority to provide such assistance; (II) the identity of the recipients of such assistance; (III) the date and amount of the assistance, and form in which the assistance was provided; and (IV) the material terms of the assistance, including — (aa) duration; (bb) collateral pledged and the value thereof; (cc) all interest, fees, and other revenue or items of value to be received in exchange for the assistance; (dd) any requirements imposed on the recipient with respect to employee compensation, distribution of dividends, or any other corporate decision in exchange for the assistance; and (ee) the expected costs to the taxpayers of such assistance…”
According to multiple sources we queried, the New York Fed has not made the names of these banks doing the borrowing available to either the Senate or House committees. And if there is pushback from the Committees, the public is not hearing about it. It was this exact kind of complacency and lack of leadership on the part of Congress in the early days of the financial crisis in 2007 that gave the Fed the guts to press a button and electronically create trillions of dollars to bail out the worst actors on Wall Street as they used large chunks of that money to reward themselves with tens of millions of dollars in bonuses and pay billions of dollars of the bailout money to lawyers to block their being prosecuted for fraud.
Journalists also failed to properly alert the public to the impending crisis – even when warning bells were loudly clanging.
More than a full year before the worst of the crisis, on August 23, 2007 the New York Times ran the headline “4 Major Banks Tap Fed for Financing.” The correct headline should have been: “Largest Banks in U.S. Take Unprecedented Step of Borrowing from the Fed’s Discount Window.” The article should have appeared on the front page but instead was buried on page C10 of the New York print edition.
Throughout the Fed’s history, a bank that is forced to borrow at the discount window because it can’t get loans elsewhere is seen as being in deep distress. That’s why banks don’t do it. The Times did acknowledge the stigma in the eighth paragraph, writing:
“ ‘Going to the discount window is like someone on the Upper East Side being seen in a Wal-Mart,’ said Charles R. Geisst, a financial historian at Manhattan College. ‘The T-shirts may be cheap, but why would you?’ ”
Geisst added: “ ‘The banks are circling the wagons. Somebody’s got a problem.’ ”.......MUCH MORE
Related, October 2:
Repo: "Too big to lend? JPMorgan cash hit Fed limits, roiling U.S. repos" (JPM)
