| When even the mainstream business press gets annoyed with the bankers sucking up so much easy money, then you better be getting yourself ready to demand retribution, even a wholesale change to a new economy, one based on geonomics. We trim this 2010 article from Bloomberg (yes, Bloomberg) of Jan 29. |
by David Reilly, Bloomberg
After the congressional hearing into the bailout of American International Group, you have to wonder. Wednesday's hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials. We're talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system deserves further congressional scrutiny.The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale, and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.
That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc.'s own mid-September bankruptcy filing.
Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. He maintained Wednesday that the New York bank had to buy the insurance contracts, known as credit default swaps, to keep AIG from failing, which would have threatened the financial system.
The hearing before the House Committee on Oversight and Government Reform also focused on what many in Congress believe was the New York Fed's subsequent attempt to cover up buyout details and who benefited.
The hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. The New York Fed, even though a quasi-governmental institution, is not subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.
This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed's bailout programs. It's as though the New York Fed was a black-ops outfit for the nation's central bank.
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