GAO Report: Federal Reserve Is Riddled With Corruption And Conflicts Of Interest, Stephen Friedman Is Targeted
WASHINGTON, Oct. 19 - A new audit of the Federal Reserve released today detailed widespread conflicts of interest involving directors of its regional banks.
"The most powerful entity in the United States is riddled with conflicts of interest," Sen. Bernie Sanders (I-Vt.) said after reviewing the Government Accountability Office report. The study required by a Sanders Amendment to last year's Wall Street reform law examined Fed practices never before subjected to such independent, expert scrutiny.
The GAO detailed instance after instance of top executives of corporations and financial institutions using their influence as Federal Reserve directors to financially benefit their firms, and, in at least one instance, themselves. "Clearly it is unacceptable for so few people to wield so much unchecked power," Sanders said. "Not only do they run the banks, they run the institutions that regulate the banks."
Sanders said he will work with leading economists to develop legislation to restructure the Fed and bar the banking industry from picking Fed directors. "This is exactly the kind of outrageous behavior by the big banks and Wall Street that is infuriating so many Americans," Sanders said.
The corporate affiliations of Fed directors from such banking and industry giants as General Electric, JP Morgan Chase, and Lehman Brothers pose "reputational risks" to the Federal Reserve System, the report said. Giving the banking industry the power to both elect and serve as Fed directors creates "an appearance of a conflict of interest," the report added.
The 108-page report found that at least 18 specific current and former Fed board members were affiliated with banks and companies that received emergency loans from the Federal Reserve during the financial crisis.
In the dry and understated language of auditors, the report noted that there are no restrictions in Fed rules on directors communicating concerns about their respective banks to the staff of the Federal Reserve. It also said many directors own stock or work directly for banks that are supervised and regulated by the Federal Reserve. The rules, which the Fed has kept secret, let directors tied to banks participate in decisions involving how much interest to charge financial institutions and how much credit to provide healthy banks and institutions in "hazardous" condition. Even when situations arise that run afoul of Fed's conflict rules and waivers are granted, the GAO said the waivers are kept hidden from the public.
The report by the non-partisan research arm of Congress did not name but unambiguously described several individual cases involving Fed directors that created the appearance of a conflict of interest, including:
- Stephen Friedman - In 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap Fed loans. During the same period, Friedman, chairman of the New York Fed, sat on the Goldman Sachs board of directors and owned Goldman stock, something the Fed's rules prohibited. He received a waiver in late 2008 that was not made public. After Friedman received the waiver, he continued to purchase stock in Goldman from November 2008 through January of 2009 unbeknownst to the Fed, according to the GAO.
- Jeffrey Immelt - The Federal Reserve Bank of New York consulted with General Electric on the creation of the Commercial Paper Funding Facility. The Fed later provided $16 billion in financing for GE under the emergency lending program while Immelt, GE's CEO, served as a director on the board of the Federal Reserve Bank of New York.
- Jamie Dimon - The CEO of JP Morgan Chase served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed totalling $390 billion, and was used by the Fed as a clearing bank for the Fed's emergency lending programs. In 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns. At the time, Dimon persuaded the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. He also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank.
- In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.
- To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said.
To read a more detailed analysis of the GAO report prepared for Sen. Sanders, click here.
To read the full GAO report, click here.
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Listen to the final 90 seconds.
I discuss the allegations with Larry Doyle.
Background:
Jan 10, 2012 at 1:55 PM
Reader Comments (19)
Washington does a lengthy write-up on this story.
http://dailybail.com/home/bloomberg-investigates-former-ny-fed-chairman-stephen-friedm.html
For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.
In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.
To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said.
http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
The Government (OUR GOVERNMENT) does nothing to stop them, they talk, they have dialogs, they negotiate, they plan and scheme how to spin this to make it look like the government is doing something and they're not. We all know they're all in bed together and against us 99%ers.
We're the little guys who are "TOO SMALL TO HEAR" and they are all "TOO BIG TO FAIL", well guess what, at least we know about you and how you really see us as nothings to you all and it's going to stop.
If anyone of 995ers did something like this, we'd be put out of business right away and our assets would be seized and then it would take months for us to get into court to defend ourselves. But these guys......they get more money from the government, what kind of a message does that send to the people??? What do I tell my kids??? How do keep and honest and faithful stance on America when all I can see is it bending over 99% of the people and you know how that ends!!
These kinds of things can't be allowed to continue, especially when it's discovered and reported on, there has to be absolute proof of this, so why are these guys that destroyed the lives of millions of americans by stealing our futures allowed to continue?? How is this possible in America?? What's happened to this country??
Everyday I read more and more news about how big business and banks have destroyed our economy and soon the world economy, I see where the government hands out billions (yes billions) to these same criminals that got us here and nothing changes it just gets worse, when is there going to be real justice in America???
Why do the people not get any real help, even when the government bailsout these large institutions they say the people own it, but we still get screwed because the people who should have been fired and thrown in jail get to keep their jobs and then get a BONUS of all thing!???!!! WTF?!?!?!?!
And if they manage to pay back the government, we the people DON'T EVER SEE a dime! Why is that, I don't see a reduction in taxes, or my home loan, or my kids college tuition, or even the deficit. Seriously, I couldn't do worse and know nothing about politics.
It's a sad day for America! I thought venting would make me feel better, I'm just more mad!! Grrrrr!!
Sooner than you think. That's why Wall Street is pissing its pants over the historically unprecedented #Occupy movement. That's why seemingly everyone wants its demands.
Not gonna happen. It's through the deliberative process, through debate and voting, that the movement will eventually center on what's wrong. It's only a matter of time.
And that is what is driving the pejorative slant against the movement, nothing else.
http://georgesblogforum.wordpress.com/2011/09/05/unnatural-law-legality-vs-humanity-update-09052011/
We do not have to share the losses
Don't worry about the voting machines, they're just a backup. The fact is, nobody makes it to the primaries unless they are bought and paid for by the Elite Special Interests. The corporate MSM Propaganda Mills make sure establishment renegades like Ron Paul and others don't get enough airtime for anyone to realize They may be the best choice for the future of the Country and the American People.
We need to scrap the whole mess, recall the den of thieves called the Presidential administration and U.S. Congress, and put a $5000.00 bounty on criminal Wall Street Executives and Lobbyists. The Middle Class might get a little of the money the bastards stole back that way, and some revenge for several decades of being being raped by a bunch of parasites
History has proven time and time again, that not one dictator or power source (bankers) have ever in all of man's history ever given up their grip of power without a bloody and violent revolution from the people. Never!
The wars that have always been fought away form these shores will soon be here on our soil.
Oct 25, 2011 at 11:30 AM | robertsgt40
6 Mo. ago I asked if its just Dar, or is the American People starting to lash out. Not just on the "DB", but evan up-town, down-town too.........Its now whare just about everyone is up tight about something....
My fear is Ann losing her job. She was fired from Middle Mang. back in June, and took the job she was trying to hire someone for. Now a new employee, if the billing office at the Hospital has to let one go, Ann will be out the door.
I worry that we will get the letter in the mail telling us our cabin, that has only 5 yrs. to go till its payed off, is in forclosuer. We could be one of the ones that did nothing wrong, but on the street.
So, like many, I wake up pissed off becouse of whare this country is headding. Yes, "Road Rage" is everywhAre today. Its "Worse'er,er" .................
( My Word ) on the DB, becouse most of us know what comes next...? The goverment got what it wanted yesterday, Violance, in 2 citys. I Pray it calms down or the first Dommino has been put in moation.........." ? " !
http://theforbiddenknowledge.com/hardtruth/uspresidentasmasons.htm
http://www.brasschecktv.com/videos/war-is-a-racket/libya-destroyed-next-stop-syria-and-then-iran.html
The Fed Impedes GAO Audits by Destroying Source Documents
http://www.nakedcapitalism.com/2015/03/fed-impedes-gao-audits-destroying-source-documents.html
Robert Auerbach, an economist to the Committee on Banking and Financial Services during the Arthur Burns, Paul Volcker, and Alan Greenspan chairmanships at the Fed, as well as being a Fed economist and now a professor at the University of Texas (Austin) has a bombshell revelation in his recent book Deception and Abuse at the Fed. He recounts how the struggle to make the Fed more transparent and accountable has much deeper roots than the mainstream media has let on, and those earlier fights revealed that the central bank hid the existence of original documents, namely FOMC transcripts, then destroyed them, and continues the practice of destroying the original records.
This chicanery means that what the GAO is auditing is not what the Fed does, but a simulacrum the Fed has served up, and a prettied-up one to boot.
In a Huffington Post article recapping some of the material in his book, Auerbach describes how the Democrats tried to make the Fed more accountable in the 1970s:
The Democrats tried to pass similar audit bills in the 1970s. The House Banking Committee (now called the Financial Services Committee) Chairman Henry Reuss, (1975 -1981, Democrat, Wisconsin) could not pass a GAO audit bill through his committee. That bill was then passed by the Government Reform Committee and became law in 1978 with substantial limitations…
In the 1970s, the Fed organized a massive lobbying campaign in the Congress against a GAO Fed audit, using officials from private banks they regulated Evidence of the Fed’s orchestration of the lobbying campaign came into public view after Reuss negotiated with Fed Chairman Arthur Burns for six months. Reuss obtained three years of transcripts from secret meetings of all twelve district Federal Reserve Banks in December 1976….
One example was: “On February 19, 1974, President Frank E. Morris of the Boston Federal Reserve Bank called on his board of directors to contact the members of Congress to promote the Federal Reserve’s position on an earlier version of the GAO audit bill.”
So the central bank is pressing executives from entities it regulates to lobby on its behalf. Charming. But here is where things get sordid:
Source FOMC transcripts should not be destroyed. The Fed lied when they notified Congress that there were no transcripts. The “17-Year Lie” is a chapter in my book republished on The Huffington Post.)
The seventeen-year lie began. Fed chairman Arthur Burns notified House Banking chairman Wright Patman in 1974 that he could not give Congress the FOMC transcripts because ‘they are routinely disposed of after the Committee has formally accepted the memorandum of discussion for the meeting in question,’ …” (Auerbach, page 89)
House Banking Chairman Henry B. Gonzalez called a hearing in 1993 to question the Fed District Bank presidents and the Board of Governors They did not explain the existence of 17 years of FOMC transcripts even though they had been informed about them at a secret Fed meeting four days before. Later, one district Fed bank broke ranks and notified Gonzalez about the transcripts. Gonzalez sent me to the Board of Governors with a committee lawyer and several staff members. They showed us the transcripts in a room right around the corner from Chairman Alan Greenspan’s office.
In 1995 a majority or more of the FOMC members voted to destroy the transcripts: