More Taxpayer Money For The Big Banks

Remember the TARP program -- the $700 billion asked for and passed during the Bush administration (with the help of politicians from both political parties)? The idea was that these big Wall Street banks were "too big to fail" and their failure would be devastating to the economy, so the taxpayers bailed them out. The banks were supposed to turn around and loan that money out to the denizens of Main Street to boost the economy.

We all know how that turned out. The big Wall Street banks were saved, but instead of loaning the money out they used it to continue playing economic games in the stock market (and of course, passing out huge bonuses to their executives). Meanwhile, the rest of America lost millions of jobs and saw record numbers of home foreclosures -- things that were exacerbated by the failure of the banks receiving TARP money to loan that money back out.

Now we learn from Bloomberg News that the TARP program, which most Americans thought was too large, was actually just chump change. The Federal Reserve had already opened its vaults for the giant banks before TARP even happened, and wound up giving those banks over $7.7 trillion in loans -- and those loans were with no strings attached, and these loans were secret, with neither the people nor the Congress being informed. The loan money was going out so fast that even Fed officials were shocked at the final total. Gary Stern, president of the Federal Reserve Bank of Minneapolis until 2009, said he "wasn't aware of the magnitude" of the secret loans.


William English, director of the Fed's Division of Monetary Affairs, tried to put a good face on these massive secret loans. He said, "Supporting financial-market stability in times of extreme market stress is a core function of central banks. Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses." If that were true and the credit did flow down to American families and businesses, the loans might have been a good thing. But that didn't happen. Credit is tighter than ever, no jobs have been created, and the foreclosures continue at record rates.

The truth is that most of that money, the part not used for executive bonuses, was used to play financial games in the stock market -- and many times those games turned out to be illegal. And it was the illegal trading of those worthless stocks and bonds that triggered the recession (set up by too many years of deregulated trickle-down policies). And were those illegal activities punished? Not at all, and they seldom are. Here's how George Washington University professor Amitai Etzioni puts it:

The Times found 51 cases over the past 15 years in which 19 Wall Street firms broke anti-fraud laws they had promised not to break. These firms include Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America. When faced with these multiple violations, the SEC simply reaches another settlement and extracts another promise, rather than bring a contempt charge in court.

Furthermore, these settlements do not even require the companies to admit to the charges brought against them. Instead, there is a provision that lets them "neither admit nor deny" the violations, which makes them less vulnerable to investor lawsuits.

And now the federal government wants to give these financial institutions a few trillion more taxpayer dollars. The Federal Reserve announced it had joined with the Bank of Canada, the Bank of England, the Bank of Japan, and the European Central Bank to "ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses. . ."

Forgive me for being cynical, but doesn't that sound just like what the last nearly $8 trillion was supposed to do? The stock market reacted positively to the news by gaining about 400 points. That doesn't surprise me, because the stock market is probably where most of that money will wind up. I doubt that very much of it will "trickle down" to Main Street where it is desperately needed. Once again the taxpayers will be bailing out the same financial institutions who have clearly demonstrated they neither care about nor are willing to help ordinary Americans.

Don't you find it strange that the government can easily find trillions of dollars to pump into Wall Street, but can't scratch up a few billion to create jobs for unemployed Americans? Does that make any sense at all -- especially since the new jobs would increase demand (thus producing more jobs) and raise the amount of tax revenues the government would get (thus paying down the debt)?

This is exactly the kind of nonsense that Occupy Wall Street is demonstrating against.