From BLOOMBERG:
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse…
Click here to read the full article.
EDITOR: Over recent years, Newslanc published reports on how banks were borrowing money from the fed at almost 0% and then buying treasury bills at a higher interest rates, thus mightily profiting from taxpayers. Based on material hitherto unavailable, Bloomberg has prepared an illuminating and detailed report on how once again the financing system has profited at tax payers expense while preventing regulations of its practices. This is a lengthily but very worthwhile article.
Given the magnitude of the financial crises brought on by the banks themselves, and the extraordinary cost to taxpayers of bailing them out, it is only appropriate that a substantial surtax be placed on the banking industry to reimburse taxpayers for their extraordinary expense incurred by the government bailing out the banks. Banks should be required to pay a surtax on all transactions, perhaps 0.2% of turnover, to a special fund set up for this purpose.
However, knowing the banks, they would simply pass this expense onto consumers!
Unfortunately the too big to fail banks have gotten bigger and control more of the economy since this bail out and the inadequate financial reform bill. We need to break these banks up, encourage community banks and get money in communities and out of Wall Street.
The Fed bailout shows why the Fed should not be a private corporation and needs to be reconfigured. It is silly for the government to give the power to create money to a corporation designed to protect the banks. They make the money then loan it to the banks for a small percentage, who loan it to the government at a larger percentage thereby putting the government (taxpayers) into big debt. It is a bizarre system that needs a total makeover.
And, in the future when industries receive this type of money from the taxpayers they need to put taxpayer representatives on their board of directors so tax payer money is used for a public good not personal profit. When corporations were invented by monarchies they always were designed to serve a public purpose. That has been lost in the quest for profit — often, short-term profit.
KZ