Hey, Bernanke! Tell Us Please! Where Are You Burying the Loot?

Fed Chairman Bernanke went to the Senate Budget Committee yesterday to testify. The Senators asked him at least four times, and in different ways, where he is burying the loot that is being shovelled his way. And, at least four times, he refused to answer.

Should Bernanke be able to treat this information as if it is confidential, like he's the doctor, or lawyer, or shrink for these crazy financial institutions which have grown malignantly throughout the innards of the republic? Or should he cough it all up and confess what he's been doing with the tax payers' money? What do you think? Do you have a view on this?

Do you think Bernanke has a right of confidentiality with his bonker clients? Or do you think we have a right to know? Do you think his confidentiality outweighs our right to know? Or do you think our right to know has priority?

I think it would be a good idea to let Senators Wyden (Or), Dorgan (ND) and Bernie Sanders from Vermont know that they have some support in what they are trying to do. They are the ones who've been named in the coverage of what happened yesterday. What about you? Do you think Senators and members of the House should continue to go after this kind of information, and find better ways to hold Bernanke's feet to the fire, as it were? Or do you think they should take "no" for an answer, and allow the Fed chief to continue to stonewall the elected representatives and senators who are trying to find something out about what their constituents have been made liable for. Like, how much? Who? What for?

These sound like pretty reasonable questions for a body with oversght authority to be interested in, don't they?

Top on the list yesterday was what is happening with the money the Treasury and the Fed are funnelling from the tax payers to the shrunken and hollowed out too big to fail insurance giant AIG . The scent of the blood dripping from the carcass of the latest $30 billion ripped out of the Federal purse, even as it was being secreted away in  Bernanke's burying places, was still warm in the nostrils of the Senators.

Wyden and other Senators  said that the identities of the banks and the other so-called counter-parties that do business with AIG and other bailed out institutions should be made public. This was according to the report from Fox News.

"They ought to have some kind of consequences," Wyden said. "There is time for some sunlight ... the public wants to know why are these people so important?"

That question didn't elicit an answer from the Chairman.

The issue is really a hot one. If AIG's losses are related to the Credit Default Swaps it wrote and sold to others as so-called insurance then there are winners for each one of AIG's losses. By making good the losses with tax payers' money the Federal Reserve and Treasury are supporting the winners of the bets against AIG. AIG's derivative contracts have become a source of income like the pass through certificates which entitle investors to income from Fannie Mae insured mortgage pools. And then it could be argued that it would not be true that AIG is being bailed out. We are paying the people who made money out of AIG with the money Geithner and Bernanke say has to be directed there. "There's no alternative."

This was discussed by David Rothkopf at the Foreign Policy web site yesterday. Here's the link.

"what's really shocking about the AIG case is how little political debate there has been about what the money is being used for. As detailed in the FT story, and as also discussed in a good story in today's New York Times, vast amounts of it, tens of billions of dollars are passing straight through AIG and into the hands of the counterparties that AIG had signed up for Collateralized Debt Obligations (CDOs), a form of investment "insurance." Each of these counterparties got paid 100 cents on the dollar. As noted in my earlier conversation with Hank Greenberg, former CEO of AIG, the number one recipient of at least the first tranche of these funds was Goldman Sachs (a deal cut by a former CEO of Goldman Sachs, Hank Paulson, while the current CEO, Lloyd Blankfein was the only major counterparty sitting in the room)."

What Greenberg told Rothkopf in the earlier discussion was that of the first $85 billion that went to AIG $30 billion went directly to Goldman Sachs as a result of that discussion between the former and current Goldman officials.Follow the link for the conversation. Rothkopf thinks the AIF bailout has become a bailout laundering process.

"AIG has become a beard in the financial bailout process. Companies that were gambling on mortgaged-backed and other securities got AIG to "insure" their bets. When the loans tanked, the companies raised a hue and cry that AIG was "too big to fail" in an effort to persuade the U.S. government to give the money to AIG... so it could pass it along to them. They got paid, bailed out in effect, but without any of the conditions going along with our other bail out deals. Virtually all of these players were private companies. Some certainly were non-U.S. companies. While some of the money going into AIG is supporting functioning traditional insurance company assets, that sucking sound you hear is hedge funds, investment banks, and other financial institutions at risk siphoning the money they need through the hollowed out carcass of AIG's benighted financial products company. It is effectively a bailout laundering operation."

In the New York Times story Rothkopf links to Edward Liddy, who was appointed CEO of the company last fall, says

Mr. Liddy said A.I.G.’s need for emergency cash from the government had stopped growing in recent weeks and had stabilized at about $38 billion. He said the vast majority of that sum had simply passed through the company and gone to other financial institutions, where A.I.G. had to settle contractual obligations, many of them involving derivatives. A lesser amount from the government had been used to bolster the capital of its own operating units.

The Hill used this issue to profile the Democrats this morning, pitting Harry Red as a supporter of the administration and Federal Reserve against a host of others from the Senate and the House. This kind of reporting indicates that expressions of support for what the Representatives and Senators are trying to do might be quite a useful thing to do.

Sanders wanted Bernanke to tell him what's been done with $2.2 trillion that have past through the Federal Reserve and into the phase space which is called a 'financial system.' Bernanke told him to go visit the Federal Reserve's web-site.

"Vermont Sen. Bernie Sanders, an independent who usually votes with the Democrats, said he found it 'unacceptable' that the central bank risked taxpayer money without detailing where the funds went.

"My question to you is, will you tell the American people to whom you lent $2.2 trillion of their dollars?" Sanders asked, referring to the size of the Fed's balance sheet.

Bernanke responded that the Fed explains the various lending programs on its website, and details the terms and collateral requirements."  

Senator Sanders also announced during yesterday's hearing that he has drafted, and is submitting legislation to compel the Federal Reserve to supply the information he requires. Sanders wants the Fed to create a section on its web site which will be updated every 30 days. Commondreams provides a release from his office, and Reuters covered the announcement in its news coverage of the Senate hearings.
 
Sanders introduced the bill after the chairman of the Federal Reserve Board, in testimony before the Senate Budget Committee, refused to identify the banks.
 
At the hearing, Bernanke told Sanders that “hundreds and hundreds of banks” tapped the loan fund. “Can you tell us who they are?” Sanders pressed.  “No,” Bernanke said, because it would be “counterproductive.” “Isn't that too bad?” Sanders interjected. “Isn't that too bad in they took the money but they don't want to be public about the fact that they received it?”
Sanders previously sought the names of the loan recipients in a February 4 letter to Bernanke. “Given the size of these commitments it is incomprehensible that the American people have not received specific details about them,” Sanders wrote.
The senator had asked Bernanke in writing to identify each business the Federal Reserve assisted in the past two years, sought details on the type and value of the assistance, the repayment terms, and the rationale for the taxpayer-backed loans.
Bernanke refused to offer specifics.
 
Dorgan raised the ante even further, according to the report in The Hill linked to above.
Sen. Byron Dorgan (N.D.), chairman of the Senate Democratic Policy Committee, said Congress needs more information.

“The fact is that we don’t know much of what the Fed is doing,” he said. “When they opened their Fed window to investment banks for the first time in history we had no information about how much money went out in those circumstances.”

Dorgan said that taxpayers through the Fed, Federal Deposit Insurance Corporation and Treasury have been put at risk for as much as $8.5 trillion.

 
$8.5 trillion? Anyone got views about that? Last I saw Roubini thought US losses would come in at like $3-3.5 trillion, others at $2 trillion or so, the IMF at more than $1 trillion, and there are still people in the Fed and Treasury who use numbers in the 100s of billions. But they already have gotten hold of almost three times more than the largest estimate. What on earth is that all about? Currency support through swaps? Support for who and what and why?
 
Isn't it about time we got some answers to these questions? Or do you think these folk who are called essential to their functions should just be left alone to continue doing whatever it is they are doing? Where on earth would anyone put $8.5 trillion? Anyone got any ideas they want to share? JP Morgan CHase has nearly $90 trillion of derivstives contracts outstanding on its own. That might be a place to start. but there are others (see page 24 of the linked report).


 

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where this mass amount of money is being shovelled to. When we went bankrupt we had to disclose all of our finances. It is part of the accountability process.

I want to know, as well, who these companies we give it to are passing it along it to. I am thinking there will be a lot of bush cronies on the big payday end of this massive looting of our treasury.

I don't understand your arguments.  Anger, yes, arguments, no.  If I need a business loan from a bank, one of the expectations I have is the privacy of the information I'm providing as justification for the loan.  I see no difference here, except that if I had the misfortune to borrow from the Federal Reserve I may be subject retroactive release of my full financials - the 'who, what, & why'.  The technical term for that practice is 'bullshit'.

You are not guaranteed privacy. For examply even if you have a late payment all of your creditors may be advised since it is frequently reflected on your credit score. This can occur even if you are contesting a bill. A person receiving food stamps pays them to the cashier in full view at the grocery store. A recipient of aid to dependant children must reveal all kinds of personal information to do with her relationships and should she wish not to reveal the alleged father of her child she will be denied assistance. A foreclosure is publicly advertised not only by neighborhood signs but advertisements in local papers. Should a person become homeless the situation is even more grim as he or she is denied any privacy and sometimes is forced to sleep in a car or even on the streets or in public parks.

However, I don't think that personal experiences of people needing public assistance are comparable to a situation in whch top banking executives not only make injudicious decision that result in the near bankruptcy of their firms but when they receive public money to help keep the business or bank afloat, they seem to feel justified in spending it frivolously, granting themselves and their underlings underserved bonuses (sometime disguised as retention incentives) or treating them to expense-paid holidays (described as retreats).

I don't think your comparison holds.

carol

In the normal course of business there is an *expectation* of privacy - *not* a 'guarantee' - plainly written on any standard loan form.  And contrary to your comparison, public benefits data is absolutely protected, far more so than any private transaction.  

 

I absolutely agree the investment bankers need to be frog-marched into Leavenworth.  But suggesting the public be allowed to go on a fishing trip by releasing otherwise private information serves no purpose, especially when directed at the wrong entity.  Treasury, Justice, the FDIC, the SEC, State AGs, and Congress all have ample power to engage in investigations and/or audits, and they all are.  But apparently not enough for a public living on 'crisis' headlines for the past 18 months.

 

My comparison holds.

 

 

They are asking for truckloads of money because they are bankrupt. When I went bankrupt my records became a matter of public record. Sad but true.

And they are not asking for loans from a bank, they are asking for them from you and I - from our governments treasury. If they don't like it they can give back the money they have already taken, stop asking for more and go it on their own.

You and I - as the prime backer of these loans - deserve full accounting of every penny and the 'who, what, & why'. I never wanted to go into the banking industry. If they want to force me to do it than they can do it my terms. 

If that is what you are asking there?

I too want a full accounting - absolutely.  But from the agencies I listed above, not from the Fed.  Not their 'area'. 

The Fed is the one with th $8.5 trillion

with special facilities and stuff and swap lines and no reference to anyone.

Where does this guy get off? "No." Really.

I'm really dubious about the contract argument too. There is a public interest here and a public good which clearly overrides private interest. Since when does a whole country putting up hundreds of billions take back seat to the private agreements between two corporations? Health, safety, welfare of ourselves and our posterity. Any of these overides what these idiots are doing. Sorry.

Bernanke didn't say 'no' - he clearly stated he would provide all the information he was legally able to (were we watching the same hearing?).  Unless of course you would rather scrap the law in order to 'protect the people'.  Funny.  I though the point of the last election was to make sure the law was *followed*, not trashed.

One of the issues at that time was that there would be Congressional Oversight. If you recall, the original three-page bill gave Paulson decision-making power without congressional oversight, and with specific exemption from any legal penalties pursuant from his decisions on how to allocate the funds. THIS WAS NOT PASSED because it was deemed to be unacceptable.

carol

the banks are borrowing money from "we the people".  When you get any kind of loan, you have to disclose all of your liabilities to the lending party and also disclose how the funds will be used.  So .... the banks are borrowing money from us, we should be able to "know" who they owe money to and how they are spending the funds.

Seems to me the Welfare Banks are just trying to fleece us without any kind of restrictions ... I cry foul! ... or is it fowl?

or is it Right On!

n/t

'Our' money?  Ok, which part of that 8.5 is 'our' money?  All of it?  The Fed does that much lending in the course of ordinary business in short-term transactions.  And leave us not forget that a mere 'hint of impropriety' is enough to cause lunatic, pee-pee-dancing investors to push nearly any company into a vortex - even if the information is unverfied rumor.

Here's the deal:  the electorate agrees to have the patience necessary to allow investigations and information to proceed in a *rational* manner, Congress and the alphabet agency list agree to fully account for the money.  It's like watching a nation of Verushka's screaming for their golden egg:  I WANT IT NOW!!!!  Well, you know what happened to her.

We (the government - of the people, by the people and for the people) are buying bad mortgages, not once, but twice. Once from the banks and another from AIG, when in the first place if we had bailed out the home-owner, maybe we would have only had to buy it one-half time.

My daddy raised me to "never trust a banker" and it turns out he was right.

Jon Stewart and Joe Nocera nail it here:

 

my daddy said 'give 'em enough rope and they'll hang themselves.'