Richard (RJ) Eskow | Nation Of Change
December 2 2011
OP-ED | It took the journalists at Bloomberg News two years – and presumably lots of legal fees – to pry information out of the Federal Reserve that should have been made public long ago. We now know that the Fed’s secret $7.7 trillion lending program wasn’t just the most massive bank bailout ever seen, and it wasn’t just free money for mega-bankers – though it was certainly both of those things. It was also the greatest hoax in stock market history.
No, scratch that. It was the greatest hoax in the history of money. And it was built on lies. How many? Let us count the ways.
Here’s the first one: The banks paid back all the money back that they were given. No, they didn’t. They paid back the principal on these loans. But by obtaining loans at rates far below market value, we now know they received the equivalent of $13 billion in cash giveaways.
Here’s another lie: Fed economists support a free-market economy.
Ben Bernanke is a conservative economist who claims to support a free-market system. But we now know that the Federal Reserve lent astonishing sums to US banks in secret, and Bernanke fought with all the resources at his disposal to ensure that this information didn’t become public. He didn’t just want it to be held back to avoid a panic during the crisis. He wanted it kept secret forever.
I don’t know what you call somebody like that, but I know what you don’t call him: A capitalist. Free markets need transparency, so that investors and customers can make informed decisions and ‘the wisdom of the market’ can prevail. Nobody wanted the market to do its job. When it came to banks, they wanted it to be blind, deaf, and dumb, unable to make sound judgments about their financial soundness.
They still want it that way. They don’t want investors to know how badly Wall Street executives failed at their jobs. They don’t want the free market to do what it does best – thin the herd so it’s free of incompetent managers like the executives who still run our largest banks.
You can believe in the free market, or you can believe in today’s Wall Street. But you can’t do both.
Here’s another lie, one that’s spread by Dimon and others: Giant banks are more efficient. Size brings efficiency in other kinds of business, but these banks needed massive help. America’s six largest banks accounted on any given day for an average of 63 percent of the debt on these loans. The only thing they’re more efficient at is wringing free money out of government-created institutions.
And, wow. Jamie Dimon sure is a hypocrite. As Bloomberg noted:
JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.