A vast majority of Americans must have been astounded by Bernanke's recent response to Congress's request that the Government Accountability Office (GAO) audit the Federal Reserve's financial transactions and assets. The following was the heart of Bernanke's response--auditing ... would be highly destructive to the stability of the financial system, the dollar and our national economic situation." The GAO is a legislative branch agency organized under the U.S. Congress. How is it possible that Bernanke would have had the guts to tell Congress to go fly a kite? This is the same Federal Reserve whose power Obama wants to expand? Does he really have a good grasp of the true nature of Wall Street and the functions of its insiders? Perhaps the $14 million he received from Wall Street bankers, investment firms and securities brokers during the election campaign are clouding his perception.
Bernanke not only screamed an emphatic, "no," but he had the gall to threaten Congress and the American people with economic destruction. How is such arrogance and power remotely possible? While it might be tolerated if coming from the oval office, it should not be tolerated from a banker. It is also, for anyone who is watching, an obnoxious affront to the Constitution as articulated in Article I, Section 8, "The Congress shall have power to " coin money, regulate the value thereof, and of foreign coin, and " to borrow money on the credit of the United States." Does this resemble anything we have witnessed during the past year? Not remotely.
Through a century of market ups and downs, interest rate fluctuations, mergers, acquisitions, political influence, lobbying and positioning insiders to the most powerful government and government related institutions, the Kings of Wall Street have nurtured and advanced their isolated power to a point where they are responsible to no one. After the Fed created hundreds of billions in bailout dollars to purchase unaudited toxic waste from its "friends," these same friends paid themselves billions of dollars in bonuses. These were billions more than the amounts they distributed to their own shareholders, and the rationalizations were as asinine as the bonuses. Obama's wishful thinking and promises of "oversight and transparency," over trillions of Fed dispensations, have long been attenuated by the dissonance of fear. Stating that the Fed and Wall Street's autonomy is complete, would be a gross understatement.
Individuals, who could not care less about the health of America, just as they never cared about their firms' clients, control the economic engines of this country. Their egos dictate their actions, and satisfaction of abnormal greed is the compelling priority. The details of the business, and its legalities, be damned. Have we forgotten that when Lehman Brothers collapsed overnight, no one knew there had been a problem? None of its executives knew the extent of the calamity when it hit their firm, nor did their books indicate where assets might be hiding or what claims might exist against them. Transparency? Due diligence? Forget being a shareholder looking for information since the senior executives, the CEO and the Board of Directors were oblivious. Was there any conscious human being near the top of the Lehman ladder who cared enough to raise doubts? Would he or she have been listened to? Not likely.
When you are too preoccupied picking out the leather for your new executive jet, or refurnishing your third mansion in Cap D'Antibe, you don't have time to spend on corporate incidentals such as the details of an audited financial statement. Even if there had been a spare moment, you'd have to fly to that Bridge tournament in Chicago, " or some other urgent pastime where your "friends," or your ego expect an appearance.
The Morgan Stanley acquisition of Bear Stearns with a $30 billion taxpayer guarantee was a sweet gift handled between the boys, with little evidence of hard-nosed negotiating on behalf of American taxpayers. Obviously, reasonableness also never entered the room. Bailouts for Citigroup, AIG, Bank of America, Citigroup, and AIG were negotiated between friends, some friends only pretended to be working on behalf of the American taxpayers. When Treasury, The Fed and the heads of the major Wall Street firms, particularly Goldman Sachs and Morgan Stanley, came together to make deals, their actions were not "negotiations" as defined in any normal dictionary. Who really represented taxpayer interests? No one. The Third Side, the taxpayer who will foot the major risk, was not in the room. Not only were taxpayers not in the room, but they were also swindled. There is no other way to describe the one sidedness of the structures that taxpayers were handed.
Taxpayers recapitalized banks under insanely bad terms and conditions, where they unwittingly guaranteed toxic asset, as occurred in the Citigroup bailout or when B. of A. acquired Merrill Lynch. Did anyone question B. of A.'s use of TARP funds to "acquire," competitors? No-one representing taxpayer interests seemed to care, and quite to the contrary, Merrill's losses were purposefully concealed from both investors and regulators. Did anyone negotiate hard with these banks, B. of A., Goldman and Citi, when as creditors to Chrysler, they forced its destruction instead of allowing the government to provide it with deals as sweet as the ones they had received themselves? Not much. Geithner and Bernanke were evidently not close friends of any Chrysler executives or employees residing in Detroit. They were, however, friends and colleagues of Wall Street.
We have written elsewhere on this post about Too Big To Fail, however, with the taxpayer's willingness (through inept government) the crisis has created ever-larger monsters on Wall Street. America's vast banking system has become weak and remains weak other than for those at the top of its food chain. The controlling players have not changed, and the economic contraction will continue. We have become numbed to the fact that when banks fail, the public pays. A few companies, under the aegis of a small band of individuals created the perfect environment for the implosion of the banking system through massive risk taking. Congress cheered actively from the sidelines. The Wall Street hands that were in large part responsible for the crisis now dictate government actions, and have effective control over the public purse. In the meantime, the Fed, standing squarely on the backs of all taxpayers, is doing the job of large banks that still refrain from injecting credit into the economy.
While megabanks trade publicly, there is a dearth of verifiable, or incisively auditable value that can be placed on them since it appears none of their executives know the extent of the worthless paper lurking deep in their bowels, and none of them would tell you if he knew. Admitting the size of the toxic assets would require enormous write-downs, and would affect their bonuses as well as the values of the company shares.
We should not get swayed into believing that Too Big To Fail is simply a remote concept dealing with enormous corporations with global reach. Too Big To Fail refers to individuals at the top of these financial giants with all of the substantial power that the companies they manage can wield. Too Big To Fail encapsulates the stupidity that brought the world to the brink of collapse. We are just a couple of mergers away from a global financial power that will be impossible for any government to regulate, although regulation already seems nonexistent for any of the current top players on the Street.
The key to minimizing the future damage that the kings of Wall Street might further inflict on the Nation is to bring their power and influence into the realm of reasonableness. This means bringing their propensity for size to within reason for any organization involved in pure "banking," and focusing their attention to providing large and small companies with the services, particularly credit, which they require to remain open for businesses.
There is a lesson to be learned from the current debacle, while the window remains very clear, and before time and retrospect blur the current reality into a distorted sequence of lies as the months advance. In order of priority, the following should be considered for a sound America going forward.""