A major new report from Bloomberg, drawn from nearly 30,000 pages of Fed documents obtained via FOIA, sheds some new light on why Congress' response to the too-big-to-fail problem in financial markets was legislation that allowed the biggest banks to grow even bigger. According to the report, the Federal Reserve and big banks worked in concert throughout the financial crisis to manipulate investors, regulators, and lawmakers by covering up trillions of dollars in Fed loans and guarantees while simultaneously lying about being healthy. As Bloomberg puts it: "While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger."Read Full Article
If you think the Senate has a pro-Wall Street tilt right now, just wait until the current Majority Leader is defeated and the next in line takes over. The Washington Post is running a piece today on the many reasons why the Senate's current number-three Democrat, Sen. Chuck Schumer [D, NY], is the most likely candidate for the position after/if current Majority Leader Harry Reid [D, NV] is defeated in the November mid-terms, not the progressive number-two, Sen. Dick Durbin [D, IL].Read Full Article
The Senate last night voted on a financial reform amendment that, although probably never having a real shot at passing, gives us a unique chance to see in the stark relief the divisions in both parties on truly reining in the "too big to fail" banks.
The amendment, a version of the SAFE Banking Act sponsored by Sens. Sherrod Brown [D, OH] and Ted Kaufman [D, DE], would have placed strict size caps on banks and non-bank financial companies. In practical terms, it would have forced the breaking up of some of the Wall Street corporations. Instead of consolidating like they have been doing for the past 20 years, banks like Bank of America and Chase would have been forced to sell some of their branches off to smaller regional banks over a period of three years.Read Full Article
The Republicans' claims that the $50 billion "orderly liquidation fund" in the Restoring American Financial Security Act would "guarantee bailouts" have been pretty thoroughly debunked at this point, but I'm reading through the comments on the OpenCongress bill page and there still seems to be some confusion. For example, the highest rated comment right now is an attempt to fight back against the Republican bailout claim, but it still gets it a little wrong. "My understanding is there is a fund, funded by the banks themselves to bailout the large banks. So it doesn't impact taxes and it just means they have to bail themselves out not the government," the commenter writes.
That's not quite right. There is a fund in the bill (the "orderly liquidation fund") that would be funded by the big banks in order to keep taxpayers from being on the hook if they fail, but the fund would be used to put failing banks to death, not to bail them out. With bailouts, banks get rescued by the government and survive. Under this bill, failing banks would be executed by the government. The orderly liquidation fund would provide the working capitol the F.D.I.C. would need to carry out the complicated process of winding down big, failing banks.Read Full Article