Just prior to Senate testimony by JPMorgan Chase CEO Jamie Dimon, Senator Bernie Sanders announced that more than $4 trillion in near zero-interest Federal Reserve loans and other financial assistance went to the banks and businesses of at least 18 current and former Federal Reserve regional bank directors in the aftermath of the 2008 financial collapse. This data is based on information from the Government Accountability Office.
Sanders’ press release noted that:
“This report reveals the inherent conflicts of interest that exist at the Federal Reserve. At a time when small businesses could not get affordable loans to create jobs, the Fed was providing trillions in secret loans to some of the largest banks and corporations in America that were well represented on the boards of the Federal Reserve Banks. These conflicts must end.”
As Lawrence Lessig writes in his brilliant new book, Republic, Lost, business and politics have so brazenly behaved in ways that defy what a reasonable person would do, that the faith and trust of citizens has been lost. Our democracy has become a charade.
During the financial crisis, at least 18 former and current directors from Federal Reserve Banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve.
Here’s a review of just a few of the facts that Sanders’ and the Government Accountability Office’s report highlighted:
- JPMorgan received some $391 billion of the $4 trillion in emergency Fed funds at the same time that Diamond’s bank was used by the Fed as a clearinghouse for emergency lending programs. In March of 2008, the Fed provided JPMorgan with $29 billion in financing to acquire Bear Stearns.
- General Electric CEO Jeffrey Immelt was a New York Fed board member at the same time GE helped create a Commercial Paper Funding Facility during the financial crisis. The Fed later provided $16 billion in financing to GE under this emergency lending program.
- Sanford Weill, the former CEO of Citigroup, served on the Fed’s Board of Directors in New York in 2006. During the financial crisis, Citigroup received over $2.5 trillion in total financial assistance from the Fed.
- Richard Fuld, Jr, the former CEO of Lehman Brothers, served on the Fed’s Board of Directors in New York from 2006 to 2008. During the financial crisis, the Fed provided $183 billion in total financial assistance to Lehman before it collapsed.
- James M. Wells, the Chairman and CEO of SunTrust Banks, has served on the Board of Directors at the Federal Reserve Bank in Atlanta since 2008. During the financial crisis, SunTrust received $7.5 billion in total financial assistance from the Fed.
Just a sampling of the conflicts of interest that have largely gone unnoticed.