Congresswoman Katie Porter
Sparks were flying throughout yesterday’s House Financial Services Committee hearing. After Fed Chair Jerome Powell and U.S. Treasury Secretary Steve Mnuchin appeared before the Senate Banking Committee on Tuesday, they were grilled for 2 more hours yesterday by members of the House Financial Services Committee. The atmosphere was far less cordial than the prior day, which wasn’t exactly tea and crumpets either.
There was good reason for the hostility. For the second time in a dozen years, another former Goldman Sachs banker holds the reins at the Treasury Department as it bails out Wall Street while crushing Main Street businesses and American families. This time it’s Mnuchin rather than Hank Paulson, who served as Treasury Secretary under George W. Bush during the financial crisis.
Before we get into the guts of yesterday’s hearing, it’s important to have the background on how Wall Street was bailed out and Main Street was sold out the last time around – as the parallels are downright eerie.
During the financial crisis of 2007 to 2010, the Federal Reserve, without any oversight or even awareness by Congress, secretly funneled a cumulative $29 trillion into Wall Street bailout programs. One of the same programs the Fed is using today, the Primary Dealer Credit Facility (PDCF), secretly funneled $8.95 trillion in cumulative loans to teetering Wall Street and foreign banks, much of that at interest rates below 1 percent interest. Two-thirds of that $8.95 trillion went to just three Wall Street trading houses: Citigroup, Morgan Stanley and Merrill Lynch. (See Table 9 and Figure 11 in above link.)
The Federal Reserve’s mandate for the past 107 years has been to be the lender of last resort to commercial banks in order to allow those banks to make loans to businesses and consumers to create a thriving U.S. economy. The mandate of the Fed has never been to be the lender of last resort to the trading houses on Wall Street to bail out their reckless speculations. But that is exactly what the Fed did secretly from December 2007 to the middle of 2010.
The Fed then battled in court for years to keep its outrageous hubris a secret from the American people after being sued by the business media for the details of its lending programs. Only in 2011, after the Fed lost its court battles and Senator Bernie Sanders and others tacked an amendment on to the Dodd-Frank Act requiring a GAO audit of the Fed’s emergency lending programs did the public finally learn the truth.
The harsh reality was that millions of struggling consumers had been foreclosed on by Citigroup (using an alias) and forced to pay high double-digit interest rates on their Citi credit cards, while the Fed had given that insolvent bank $2.5 trillion in cumulative loans as the bank lied to the public about its financial condition. Other major Wall Street banks also continued to charge high double-digit interest rates to consumers on their credit cards and engaged in illegal foreclosures as they were being secretly bailed out by the Fed…
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