"At the height of the financial crisis, the Federal Reserve
allowed the world’s largest banks to turn more than $118 billion in junk bonds,
defaulted debt, securities of unknown ratings and stocks into cash.
The U.S. central bank allowed borrowers
to use $929 million in market-valued debt that had gone into default, rated D,
Did the Federal Reserve
expose taxpayers to hundreds of billions of dollars of potential losses
without congressional approval, when it allowed some financial institutions
to exchange low quality securities for AAA Treasuries?
Did the Federal Reserve allow many foreign financial institutions
to borrow at the Fed’s discount window?
"The data reveal banks turning to the Fed for help almost daily in the fall of 2008
as the central bank lowered lending standards
and extended relief to all kinds of institutions it had never assisted before.
...The Korean Development Bank, owned by the South Korean government,
used the program to the tune of billions of dollars...
Many foreign banks, including the French BNP Paribas, the Swiss UBS
and the German Deutsche Bank, took extensive advantage of various programs.
Even a major bank in Bavaria benefited,
as well as another one headquartered in Bahrain..."
Why did the Federal Reserve not disclose
how much some financial institutions received during the financial crisis?
Were American taxpayers responsible for the loans?
"...In all the Fed disclosed more than 21,000 transactions,
totaling $3.3 trillion to financial institutions…
...foreign banks who benefited from the Fed's aid included European Central Bank,
Bank of England and the Bank of Japan as well as Swiss bank UBS,
which borrowed more than $165 billion, Deutsche Bank ($97 billion)
and the Royal Bank of Scotland ($92 billion)."
Daily Mail, Dec 2, 2010
Did the Treasury Department unilaterally guarantee trillions
without congressional approval?
"The Fed's efforts …reached across a broad spectrum of the economy,
benefiting stalwarts of American industry including General Electric and Caterpillar
and household-name companies such as Verizon, Harley-Davidson and Toyota."
Washington Post, Thursday, December 2, 2010
By giving the government unlimited powers, the most arbitrary rule can be made legal;
and in this way a democracy may set up the most complete despotism imaginable.
Friedrich von Hayek
If the government manipulated financial markets to stimulate demand
after too many borrowers acquired too much unsustainable debt,
did intervention reward some
who may have contributed to causing the problems in the first place?
If the natural cycle of capitalistic democracy revolves between risk and aversion,
what should happen if government intervention perverts the process
to forestall short term economic pain?
The opposite of a fact is falsehood,
but the opposite of one profound truth may very well be another profound truth.
At what point do bailouts do more harm than good?
"Fed Gave Banks Crisis Gains on Secretive Loans Low as 0.01%
Credit Suisse Group AG, Goldman Sachs Group Inc. and Royal Bank of Scotland Group
each borrowed …from a Federal Reserve emergency lending program
whose details weren’t revealed to shareholders, members of Congress or the public.
The $80 billion initiative...made 28-day loans from March through December 2008,
...They paid interest rates as low as 0.01 percent…
The release was mandated after the U.S. Supreme Court
rejected an industry group’s attempt to block it."
Bloomberg, May 26, 2011
Is the United States of America the "Land of the Free", if the nation's monetary policy
is performed by an unelected privately owned entity who acts above the law?
"[The Sarbanes-Oxley Act] places a series of requirements and restrictions
on executive officers and directors of companies, the most significant of which
is the personal certification by the company’s CEO and CFO of periodic reports…
The …certification …requires CEOs and CFOs
to certify in each annual (10-K) and each quarterly (10-Q) report that:
they have personally reviewed the report and:
…the report does not contain any material misstatements or omissions;
…the financial statements …fairly present in all material respects
the company’s financial condition and results of operations…
…Since the requirement that the financial information be presented fairly
is no longer qualified by the phrase in accordance with GAAP,it is conceivable
that even if a company’s financial statements are in compliance with GAAP,
they may still violate the fair presentation requirement…"
Rizvana Zameeruddin, Northeastern Illinois University