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[gunslnger.livejournal.com]

GAO audit report shows Federal Reserve issued $16 trillion during recession, Sen. Sanders urges reform

The Eye Popping Fed Audit

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...

Bernanke Secretly Gives away Sixteen Trillion Dollars

Take a look at that number. $16 trillion. That's money that didn't exist in the treasury. It was created in order to be loaned out.

The GDP of the United States is $14.12 trillion, the entire national debt of the United States government spanning its 200 plus year history is $14.5 trillion. The budget that is being debated in Congress and the Senate is $3.5 trillion.

Now we can see why the Fed resisted any kind of audit so strongly. I think the last article makes a good point; the debate about the debt ceiling is largely irrelevant and a distraction. The problem is with the monetary policy and the Fed printing money as they feel like it.

Comments

[a-new-machine.livejournal.com]

And yet inflation stayed relatively low (http://www.tradingeconomics.com/united-states/inflation-cpi), and only now, nearly two years later, is it even approaching the pre-recession level. How do we explain that, if the Fed issued another GDP's worth of currency during the recession?

And yet, no it wasn't.

[foreverbeach.livejournal.com]

Look at raw materials and commodities prices. They have soared. SOARED. Records highs in many of them.

Re: And yet, no it wasn't.

[kylinrouge.livejournal.com]

That's what happens during ANY recession.

Re: And yet, no it wasn't.

[nevermind6794.livejournal.com]

Inflation stats account for those. So does the Billion Price Project at MIT, which directly measures consumer prices and roughly tracks the official inflation stats.

Basically, the fact that commodities prices went up does not mean there was inflation.

[rasilio.livejournal.com]

Checked the price of food lately?

Inflation is actually several percentage points higher than the official numbers.

[sandwichwarrior.livejournal.com]

It's an accounting trick.

The official inflation numbers are calculated by taking the average prices of certain goods over a 5 year timeline. This is supposed to limit the effect of seasonal fluctuations but it has also served to mask the severity of the issue.

As others have pointed out, look at food prices. Annecdotal at best but I've noticed that the price of a bag of Rice at my local supermarket jumped from $2.30 to $4.95 in the last year.

[a-new-machine.livejournal.com]

But there are several other pressures on food, particularly exploding middle classes and stresses on oil prices (which then impact storage and shipping costs up the entirety of the supply chain). You'd have to isolate those out to assess how much of the price change is due to money supply increases.

[oslo.livejournal.com]

For those actually interested in the report and not the misleading headline number - there's a link to it in the first link that gunslnger's first link.

First things first: that $16 trillion number represents amounts loaned - not "given away," loaned - to various financial institutions through a variety of facilities over a two-and-a-half year period. The amounts weren't all loaned at once; they had staggered maturities and were extended at different times, so that (per page 2 of the GAO report, which you apparently haven't read) "[l]oans outstanding for the emergency programs peaked at more than $1 trillion in late 2008."

So the comparison to U.S. GDP or debt is meaningless. If you were to aggregate any large bank's activities over several years you'd get similarly eye-popping amounts.

It's also worth noting that almost all of this money - yes, almost all of this eye-popping $16 trillion amount - has been repaid to the Fed, with interest. And the Federal Reserve transfers revenues in excess of its expenses to the Treasury Department, which revenues the GAO reports "have increased substantially in recent years, chiefly as a result of interest income earned from the Federal Reserve System’s large-scale emergency programs."

Second: the Federal Reserve is a bank. They don't "print money." They can't "print money." All that they did was put a large pot of capital to work by extending loans to systemically important financial institutions during a severe liquidity crisis. As the "lender of last resort," this is exactly what we want the Fed to do in a severe liquidity crisis.

They don't seem to have done it "secretly," either. The GAO report specifically notes that some of the Fed's largest contracts were noncompetitive, but that's a different kind of consideration. Anyone paying attention knew that a lot of this stuff was going on at the time. Especially the MBS transactions - those were open-market transactions! How the hell was that secret?

Now we can see why the Fed resisted any kind of audit so strongly.

Yes, perhaps they anticipated that the audit would prompt a mix of responses like yours, misinformed on the one side by financially illiterate but savvy politicians (appealing to financially illiterate constituents) and on the other by self-serving precious-metal speculators (Goldseek.com is one of your sources? Really?), ultimately resulting in the erosion of the Fed's independence. Because what we really need in a financial crisis is more debt-ceiling-debate-like posturing over whether the government should be involved in providing liquidity to large financial institutions.

I mean, I kind of wonder how there is any question about this. We know what happens when the government doesn't get involved in circumstances like those we faced in 2008: Lehman Brothers. The collapse of that bank really pitched the whole crisis to a new level of badness. Whether more proactive governmental intervention could have helped, we'll never know, but considering how things have panned out, broad intervention seems to have been a good thing: the bulk of the outstanding debt now is in the Fed's MBS holdings - which are about as safe as Treasuries (because they're guaranteed by Freddie and Frannie Mac, among others, who are of course backed by the federal government, which again is another issue).

I think the last article makes a good point; the debate about the debt ceiling is largely irrelevant and a distraction. The problem is with the monetary policy and the Fed printing money as they feel like it.

Oh, ha, you mean the Goldseek.com piece? Sure, pour your money into gold and silver. That's not a bubble waiting to pop or anything.

[the-rukh.livejournal.com]

Yep.

[gunslnger.livejournal.com]

It was difficult to find anyone reporting on the results of the audit, so yeah, these three links are the only ones I could find.

You glossed over the fact that most of the "lending" was to foreign banks and businesses. That's not within the legal purview of the Federal Reserve. They do not have the right to send our money out of country without oversight of Congress. But I'm sure you just won't care about that either, just like the Fed didn't care.

And you miss the point by trying to focus on it being a loan. The money was given out, and it was money that was created to be given out, and it was given out to mostly benefit the people who had caused the problem.

They gave out money that didn't exist. That's called printing money. So, they obviously can and did print it.

The "secretly" part is referring to the fact that they didn't get Congress to approve it. And "anyone paying attention" is worthless as you would have to know to pay attention in the first place, which no one did.

So, you appear to be on the side of the bankers who caused the problem. Wonderful.

[kylinrouge.livejournal.com]

Marry me.

[harry-beast.livejournal.com]

perhaps they anticipated that the audit would prompt a mix of responses like yours
Politicians will spin information for political gain, and speculators will use information in self-serving ways. Neither of these facts is a justification to attempt to hide audit results.

[foreverbeach.livejournal.com]

Now we can see why the Fed resisted any kind of audit so strongly.

Actually, that's the lesser reason why. The greater reason why is that the Fed uses fraudulent accounting methods not even accepted by the GAO, which is itself using methods not accepted under GAAP.

[kylinrouge.livejournal.com]

Source?

[kylinrouge.livejournal.com]

I like you don't provide any conclusions, you just throw out some numbers and somehow try to shoehorn it onto another topic to compare numbers so people can be outraged! Numbers!

Thanks for the laugh.

[udoswald.livejournal.com]

I suppose you'd rather they had just let those banks fail? As has been stated elsewhere, these were loans (not giveaways) and many have been repaid (at a profit for the Fed). Considering that without those loans, you and I would either be living in a walled compound waiting for the murderous hordes, or one of those hordes, I think it's a small price to pay.

[gunslnger.livejournal.com]

I'd rather they be open and honest about what they do with the federal money and not secretive, at minimum.

[policraticus.livejournal.com]

If anyone understood what $16,000,000,000,000.00 meant they might be upset.

$16,000,000,000,000.00

[anfalicious.livejournal.com]

is bananas?

[mrbogey.livejournal.com]

If this mattered to you then you'd put Obama as worse than Bush.

[underlankers.livejournal.com]

So we replace it with what? Barter?

[a-new-machine.livejournal.com]

The golem-labor standard.

[kylinrouge.livejournal.com]

GOOOOOOOOOOOOOOOOOOOOOOOOOOOOOLD!!!!!!!!!!!!!

[anfalicious.livejournal.com]

I'm a big favour of the bean standard. Whilst we're at it let's reduce denominations to one, some, many and shitloads.