"Private" Federal Reserve bailed out AIG and Bear Stearns BEFORE the bailouts.

[JMJ]

The Fed in Hot Water

Thursday, April 1, 2010

The Fed has finally came clean. It now admits it bailed out Bear Stearns – taking on tens of billions of dollars of the bank’s bad loans – in order to smooth Bear Stearns’ takeover by JPMorgan Chase. The secret Fed bailout came months before Congress authorized the government to spend up to $700 billion of taxpayer dollars bailing out the banks, even months before Lehman Brothers collapsed. The Fed also took on billions of dollars worth of AIG securities, also before the official government-sanctioned bailout.

The losses from those deals still total tens of billions, and taxpayers are ultimately on the hook. But the public never knew. There was no congressional oversight. It was all done behind closed doors. And the New York Fed – then run by Tim Geithner – was very much in the center of the action.

This raises three issues.

First, only Congress is supposed to risk taxpayer dollars. The Fed is not part of the legislative branch. Its secret deals, announced almost two years after they were done, violate the democratic process, if not the Constitution itself. Thomas Jefferson put a stop to Alexander Hamilton’s idea of a powerful central bank out of fear it would be unaccountable to the public. The Fed has just proven Jefferson’s point.

Second, if the Fed can secretly bail out big banks, the problem of “moral hazard” – bankers taking irresponsible risks because they know they’ll be rescued – is far greater than anyone assumed after Congress and the Bush and Obama administrations bailed out the banks. Big banks will always be too big to fail because they know the Fed will secretly back them up if they get into trouble, even if Congress won’t do it openly.

Third, the announcement throws a monkey wrench into the financial reform bill now on Capitol Hill, which gives the Fed additional authority by, for example, creating a consumer protection bureau inside it. Only yesterday, Sen. Jim DeMint (R-S.C.) blasted the Dodd bill for expanding the Fed’s authority “even as it remains shrouded in secrecy.”


http://robertreich.org/post/48921794...d-in-hot-water

[tas38]

Yes and JPMorgan Chase got it handed to them for penny's on the dollar, it's been going on for a long while now, the teleco's and others on a much smaller scale. The big banks set all this stuff up and most biz's filed BK, and the CEO's was paid a fat check to setup the cheap sale, after the bank told them they had to file BK even though they had the funds to keep going.

Stock holder lost everything and the banks grab billions dirt cheap, judges was told what they was pulling off and still went along with it, the gov't even lost up to 50% of their workers retirement funds all this was a big grab from the big banks, the fed had no choice after they left it go on so long. But to do the bailout and hand it over for penny's on the dollar, like banks would not give auto makers loans like auto makers was a bad risk, we all know auto makers are not a bad risk at all that is for sure.

[tekz999]

So is this an advantage or disadvantage to the worlds economy?

[tas38]

Well china sure did pick up some really great deals that is for sure, and we loaned lots of money so that not cheap, but over all I think the world is all the better for it because it learned to work together.

If we go down they go down pretty simple, you work together to help each other out, or the pain will be much worst then doing it alone, for the first time in history money took a back seat to let common sense take over.