Andrew Huszar, the former “quarterback” of the Federal Reserve’s quantitative easing program, offers up an apology to the American people. Mr. Huszar states what many people have believed for a very long time: quantitative easing is a backdoor corporate welfare program to many of America’s largest banks:
I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street.
In this Mercatus Center publication, Professor Benjamin Blau studies the likelihood of receiving emergency assistance based on a bank’s political connections. Dr. Blau discovers a bank was 10-17 percent more likely to receive emergency loans than banks that were not politically connected:
Among the extraordinary policy responses to the 2007 financial crisis was the emergency lending program by the Federal Reserve to both domestic and foreign banks, eventually totaling $16 trillion. The scope of this intervention means that examining the common characteristics of the banks that received emergency funding from the Fed could greatly increase our understanding for dealing with the next crisis.
Adam Taylor from Business Insider has recently written the following article, that shows how a 2003 legislative decision by the government allowed some banks to trade physical commodities. New studies have shown that this plan enacted by the government for the banks has cost the American consumers more than $5 billion over the last three years.
Kocieniewski’s investigation centers on Metro International Trade Services, an aluminum storage company that Goldman Sachs bought three years ago. According to the Times, since Goldman bought the company the average wait time at the storage facility has gone up more than 20-fold. As the wait times are longer, the companies’ revenues for storing the aluminum are higher. This cost is reflected in the market price of aluminum.
Andre Francisco at POGO writes about the new rules being create to regulate banks – written by lobbyists for the banks!
Industry lobbyists have their work cut out for them after the passage of Dodd-Frank in 2010, which introduced volumes of new regulations in an effort to overhaul the financial system after the collapse. In addition to helping to write regulations, lobbyists are stepping up their political contributions to both sides of the aisle.
Jeffrey Sparshott, Jon Hilsenrath and Brody Mullins wrote an article in the Wall Street Journal about some questionable activity from the Federal Reserve:
Some of the biggest banks and investment firms on Wall Street were among those that received minutes of the Federal Reserve’s latest policy meeting 19 hours before the market-sensitive document was released.
The Fed said Wednesday that a staff member in its congressional liaison office accidentally released minutes of a March 19-20 policy meeting Tuesday afternoon to many of his contacts, including Washington representatives at Goldman Sachs Group Inc., Barclays Capital, Wells Fargo & Co., Citigroup Inc. and UBS AG. Also among the recipients: King Street Capital Management, a hedge fund, and Carlyle Group, CG -1.97% a private-equity firm.
Lorraine Woellert from Bloomberg recently reported about the leaking of sensitive information, possible insider trading and cronyism inside the Federal Reserve.
Banks including Citigroup Inc. and Goldman Sachs Group Inc., along with congressional staff members and trade groups, received potentially market-moving Federal Reserve information 19 hours before the public in a release the central bank called accidental.
The release was “entirely accidental,” Smith said. “This was a list of professional contacts that one individual had,” she said. “This group of individuals does not in any normal course receive any information early.” The mistake was discovered this morning, according to the central bank.
The list included Barclays Plc, BB&T Corp., BNP Paribas SA, Capital One Financial Corp., Citigroup Inc. (C), Fifth Third Bancorp, Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Nomura Holdings Inc., PNC Financial Services Group Inc., Regions Financial Corp., U.S. Bancorp, UBS AG and Wells Fargo & Co.
Nick Sorrentino at Against Crony Capitalism writes about a new book published by David Stockman, focusing on how capitalism has been corrupted and turned into cronyism.
…we heartily recommend this sprawling work to anyone who wants to look into the crony capitalist heart of darkness, to anyone who really wants to understand what is actually going on in the economy. Stockman doesn’t hold back in any way and he couples his intellectual kinetic energy with the expert analysis of an insider who is actually inclined to tell the truth. You’ll grow some brain cells.
David Stockman has written a classic. The Great Deformation is a triumph.
The Project on Government Oversight (POGO) has recently published a comprehensive report about the current cases of: revolving door, conflict of interests and cronyism associated with former employees of the Security and Exchange Commission (SEC) and the corporations they are supposed to regulate. You can read the report as an eBook here.
“A revolving door blurs the lines between one of the nation’s most important regulatory agencies and the interests it regulates. Former employees of the Securities and Exchange Commission (SEC) routinely help corporations try to influence SEC rule-making counter the agency’s investigations of suspected wrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals, and win exemptions from federal law.
Mark Modica from the National Legal and Policy Center has written the following article, regarding how a watchdog for the government’s bailout, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), has recently directed a devastating critique against the US Treasury’s methods of channeling billions of taxpayer dollars into bailed-out companies.
The Detroit News quotes the SIGTARP report as stating, ‘While taxpayers struggle to overcome the recent financial crisis and look to the U.S. government to put a lid on compensation for executives of firms whose missteps nearly crippled the U.S. financial system, the U.S. Department of the Treasury continues to allow excessive executive pay.’ The report goes on to mention that executives at bailed-out firms, “…continue to rake in Treasury-approved multimillion-dollar pay packages that often exceed guidelines.
The Wall Street Journal has recently reported the recent most serious case of revolving-door between too-big-to-fail banks and the federal government:
There was a time when you had to be successful on Wall Street to become secretary of the Treasury. Now along comes presidential nominee Jack Lew, whose only business credential is a stint at the most troubled too-big-to-fail bank.”
“During the darkest days of the financial crisis Mr. Lew served as the chief operating officer of Citigroup‘s Alternative Investments unit (CAI). […] CAI no longer exists. At the end of Mr. Lew’s first quarter on the job, the unit reported a $358 million loss. Things got much worse after that but Citi stopped breaking out CAI results in its earnings releases. The unit was eventually shuttered and many of its assets were sold.