Large US banks profited off Federal Reserve
27 Apr, 2011 16:44
A new report shows America’s largest banks likely profited off of the Federal Reserve by borrowing money at extremely low rates and then re-lending it back to the government at much higher rates.
The data from the Congressional Research Service shows banks received cash at near free levels and then opted to lend it out to the federal government at high rates, essentially taking advantage of tax payer funds. Meanwhile the same banks refused to lend the money handed to them by the Fed to Americans in need of loans for mortgages and small businesses. Taking the federal hand out and flipping it for profit would have been easy for savvy financial firms. The government was as desperate to borrow as the Fed was to hand out cheap cash.Independent Senator Bernie Sanders from Vermont has called the lending program "direct corporate welfare to big banks,” and initially ordered this study. The report shows the money was used to bring profits to big business "instead of using the Fed loans to reinvest in the economy," Sanders said. The Fed however never required any conditions on how the $3 trillion dollars it lent to banks was to be used. The Fed was giving money away with no strings attached. "Why wasn't the Fed providing these same sweetheart deals to the American people?" asked Warren Gunnels, a senior policy adviser to Sanders. "The Fed was practicing socialism for the rich, powerful and the connected, while the federal government was promoting rugged individualism to everyone else."The Fed doled out on a number of occasions massive loans in excess of millions of dollars to banks at low rates or for very small fees. Nearly all borrowers, including Bank of America and JP Morgan Chase, borrowed money from the Fed and showed later returns – mainly on government loans. As the big banks borrow and prosper American small businesses continue to suffer dues to a lack of credit and the inability to stay afloat in an economy where consumerism has fallen. Families suffer as unemployment continues, foreclosures surge and conditions fail to improve on Main Street.