http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
To make this more palatable, I suggest watching the Daily Show's coverage, which is available on the show's website, the bit is called America's Next TARP Model, it played on Thursday Dec 1.
What can we say about this? I know we have been discussing the role of government; some seem to think our governmental institutions are going to lead directly to an apocalyptic fate where the U.S. greenback will lose all value. While I have made it clear that, I do not agree with the former statement, this opaque maneuvering of government is unconscionable. What accountability is there if the Fed is allowed to make take such unilateral action? What can we say about moral hazard here?
I'm not sure why $13 Billion dollars is even making the headlines when the GAO audit of the Federal Reserve already revealed a cumulative of over $16 Trillion in secret loans from December 1, 2007 to July 21, 2010 (http://www.gao.gov/new.items/d11696.pdf pg 131).
ReplyDeleteCertainly it creates a huge moral hazard as banks are insulated from bad market decisions and their losses are socialized and thrust onto the tax payers.
"What accountability is there if the Fed is allowed to make take such unilateral action?"
Little to none. This is a huge problem. However, I doubt the solution is to simply turn control of the Fed over to congress, an entity that has repeatedly shown irresponsibility and short-sightedness. Perhaps something like Ron Paul's Competing Currency proposal might be able to gain traction and help solve this problem.