The Federal Reserve yesterday released some details of its massive bailout low-interest lending to banks and non-bank corporations alike, set at "$16 trillion in purchases of commercial paper" by Sen. Bernie Sanders (I-Vt.), whose legislation compelled the Fed to release the information. In a conference call discussion with reporters on the release, Sanders said, among other things, "We should restore the Glass-Steagall legislation" to stop and reverse this process.
"We learned today that TARP was pocket change," Sanders said, "compared to trillions in near-zero interest loans doled out by the Fed to virtually every major bank and many large non-bank corporations: Goldman Sachs, $600 billion; Citigroup, $1 trillion; Bank of America, $700 billion; Merrill-Lynch, $1.2 trillion; Morgan Stanley, $1.5 trillion. Non-bank companies received huge bailout loans: GE, McDonalds, Caterpillar, Harley-Davidson, Verizon, and AIG of course. And most surprising, huge amounts were loaned to European megabanks, including Deutschebank and Credit Suisse, each with about $300 billion in mortgage bonds sold to the Fed."
Sanders asked, "How many TARP recipients got zero-interest loans from the Fed and paid back TARP, thus removing limitations on their executives' enrichment?... I will ask how much of these trillions was corporate welfare, borrowed for nothing and put back into Treasury securities to earn interest?"
He promised this was "the beginning, not the end" of Congress watching the functioning of the most secretive financial institution. "We have to watch how it functions, not curtail its powers."
To a question from EIR on joining the Glass-Steagall mobilization, Sanders reviewed his 1990s opposition to "all this deregulation," and said, "If you're asking, do I believe we need to restore Glass-Steagall now—yes, I do. We need to do that." Asked, as a followup, if he was on guard for new Fed mega-lending to "European megabanks" in the euro collapse, Sanders replied, "This really means that some European governments are resisting doing what the Fed has done here, and is doing. Why are they resisting? Why should the Fed be doing it? We are going to be monitoring them steadily. They know now we are watching."
Sanders was largely discussing what was revealed about the Fed's vast Commercial Paper Funding Facility. The disclosure on the Term Asset Lending Facility (TAF) also contained the surprise, that six of the 11 top bank recipients of one-three month loans from the Fed through TAF were European banks — including InterAlpha's Santander and Societe Generale. (Five other InterAlpha banks were nationalized or rescued by European governments. )
In a related development today, yields on U.S. Treasuries rose significantly after news reports suggested that the United States would be once again bailing out Europe, through precisely the mechanisms revealed in the Sanders Fed disclosures. Furthermore, Reuters reported that the United States would be contributing to the expansion of the European Financial Stability Facility (EFSF) through added contributions to the IMF, which would then be loaned to the EMU bailout fund.