The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."

Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.

The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said.

The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.

A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. "The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street."

***** If you recall, Herman Cain said the FED didn't need an audit, they already had too many internal audits to deal with, and there was NO problems that he was aware of. He NOW seems to be back-peddling on this issue! Sounds like Mr Cain has a tendency to get caught in one deceptive decision after another. His choices, as in his 999 plan, seem to be based more on talking points than realities!

http://www.washingtonpost.com/blogs/fact-checker/post/fact-checking-the-post-bloomberg-debate/2011/10/11/gIQAdAugdL_blog.html


Front runner?...... I THINK NOT! *****

Sounds like its time to call in some loans.......

Consider just how much stronger the dollar would be right now if that money had been funneled into the Federal debt....or even into increasing the U.S. Gold Reserve. (I'm pretty sure it's empty....we haven't been on a gold standard since 1971, and no public audit has been performed since 1974.)

We've been carrying a Federal debt since the 1950s - it has never been paid off since then. If we made any payments on that debt, it would now be over $4 trillion @ 5% annual interest. At 10% interest, that same debt would have grown to over $66 trillion if no payments were made. The point of mentioning this is to highlight that a substantial portion of the Federal debt has been hanging over our heads for almost 60 years.

Consider that for a moment....about one-third of the federal debt may be from post-WWII. Since then, we have lowered tariffs, switched to a credit-based economy, shipped manufacturing overseas, watched our imports rise to record levels, and become a nation subsisting on service-based industries. Without manufacturing and exports, the dollar weakens in a credit-based economy. That's because the money we spend on goods is leaving the country, rather than remaining in circulation within our own borders. No gold standard means a weakened dollar without manufacturing to support it. Long-term and growing debt weakens the dollar. Meanwhile, that money is circulating in another country where it likely still has increased value over the local currency.

Right now, the Federal debt is equal to the U.S. GDP. In other words, it would take all of the goods and services produced in our country just to pay off the debt in a single year. Now consider it like a mortgage. If you have a $300,000 house mortgaged at 4% interest, you need to pay $12,000/year just to cover the interest. In a 15-year mortgage, you need to pay an average of $20,000/year on the principal plus you still have to pay interest. So, if you earn $100,000/year, at least one-quarter of your income goes toward your mortgage. With the Federal debt and a balanced budget, it would take 17.5 years to pay off using one-quarter of last year's Federal spending - 2.5 years longer. At our current spending, we could never pay off the debt in even 20 years without both tax increases and budget cuts. If the Federal debt was treated like a mortgage, our nation would be foreclosed upon, and we would likely need to file for bankruptcy. Therefore, it behooves us to strengthen the dollar just to slow debt growth.

(The original debt was around $250 million, but it had briefly been reduced to $200 million or so....and it has increased every year since. I posted something about this from a link quite awhile back.)

Now, if you check prices of goods both pre-1971 and post-1971, you will find that over the last 40 years, the U.S. has experienced its highest long-term rates of inflation ever. Despite depressions and recessions, prices remained fairly stable over the long-term prior to 1971. This is partly due to the gold standard. It is also because depressions were marked by periods of deflation which countered the effects of inflation. Our current economic system stabilizes prices over the short term, reducing volatility of prices, but only allows for inflation, not deflation. Hence, prices continue to rise and rise and rise. They do not revert to previous levels. The only way to counter inflation within our system is to increase the value of the dollar, thereby giving it more buying power. Instead, we have constantly undermined the dollar's value for the past 40 years.

What most people do not recognize is that the trend began prior to 1971 with post-WWII rebuilding and the Cold War. Cold War policies opened up new global opportunities for American businesses. It was those businesses which pushed for the credit-based economy and lowered tariffs. When this was happening, my dad was dealing with many high-ranking corporate execs and the Federal government. He was privy to a lot of what was happening within the business world because of it. He told me much of what he heard in the board rooms. Even then, as a history major, I took a few classes in U.S. political history. It corroborated what my father told me, and I now have texts with a substantial amount of economic data from that time period.

While I don't think there was any big power-hungry conspiracy, I do think that poor choices and policies were pushed through fueled by greed. Since then, there are those in the corporate world who have risen to take advantage of the situation created from these mistakes. I personally mark the 1990s as "The Return of the Snake Oil Salesmen". The OP's article only highlights how ingrained corruption has become in both government and the corporate world. The sad truth is that this is the second or third generation of corporate pirates since the U.S. economy began shifting away from its roots. It's just taken us this long to become aware of how bad things are likely to become before everything is done.

sounds that way.....