by Pam Martens and Russ Martens, Wall St On Parade:
During his testimony to the Senate Banking Committee yesterday, Federal Reserve Chairman Jerome Powell let it slip out, for the first time, that the Federal Reserve has had a 10-year game plan to deal with the financial crisis. In response to a question on cyber threats from Senator Ben Sasse of Nebraska, Powell stated the following:
“They kind of pay us to be awake at night worrying about things. I would say that if you look at what happened in the financial crisis, we had a game plan there. We implemented it over the course of 10 years. I won’t say that it’s perfect or anything like that, but we have a plan that is meant to address those kinds of things.”
“Those kinds of things?” The financial crisis, fueled by corruption and lax regulation of Wall Street banks, destroyed the housing market in the U.S. and left the U.S. economy in tatters. Millions of Americans lost their jobs and their homes to foreclosure. The New York Fed was the supervisor of key Wall Street banks that caused this problem – shouldn’t it have had a 10-year game plan to prevent “Those kinds of things” instead of creating the game plan after the damage had been done?
Wall Street On Parade has been carefully following the Federal Reserve for the past decade and filing Freedom of Information Act requests. The Fed has repeatedly been non-responsive. This is the first time we are hearing about any formal 10-year game plan to deal with the worst financial crisis since the Great Depression. It’s time for the Fed to come clean with the American people about the granular details of that plan and allow elected members of Congress to vote on it.
We do, however, know that the Federal Reserve set out to keep the $29 trillion part of that secret 10-year game plan wrapped behind a dark curtain from the American people. That’s the cumulative amount of money the Fed funneled to teetering Wall Street banks and global central banks to prop up the still corrupt Wall Street trading houses. It took more than two years of court litigation, an amendment to the Dodd-Frank financial reform legislation, and the research work of the Levy Economics Institute to bring that into the light. Now the Fed is at it again, with no Congressional oversight or any vote held in Congress. (See Fed Repos Have Plowed $6.6 Trillion to Wall Street in Four Months; That’s 34% of Its Feeding Tube During Epic Financial Crash.) Is the Fed’s latest money funnel to unnamed trading houses on Wall Street also part of its 10-year game plan?
Powell’s appearance before the Senate Banking Committee was preceded the day before by his appearance before the House Financial Services Committee. Repeatedly, during both the Senate and House hearings, Powell was asked what the Fed is doing to address the growing wealth and income inequality in the U.S. that far exceeds other major industrial countries and why it cannot use those some bold, creative ideas that it brings to bailing out Wall Street to help struggling Americans and cities and towns that were devastated by the financial crisis.
Congresswoman Rashida Tlaib of Michigan on Tuesday told Powell that he was wrong that the Fed didn’t have the authority under its emergency lending powers to help municipalities like her devastated Detroit. She submitted for the record statutory language from the Federal Reserve Act showing it does indeed have that power. She told Powell:
“So Chairman, given that you actually do have the authority, can you explain to me why we shouldn’t ensure that state and local governments have access to funding during times of distress?”
Powell said that it’s “not appropriate” for the Fed to do this and it should be dealt with by the fiscal authorities rather than the monetary authorities. Tlaib responded:
“So when the Fed steps in to rescue banks in a crisis is that because you believe their role in the economy is vital…My city filing bankruptcy was devastating to so many retirees sir. Forty, fifty years they worked for the City of Detroit, saw their pensions diminished, gone. Do you not believe that the government of Detroit and Puerto Rico also play a vital role that should be preserved even if financial crises make it hard for them to borrow money?”
Powell answered: “What I believe is that’s not a job for the Fed.”
The most scathing rebuke of the Fed and the current administration came from the ranking member of the Senate Banking Committee, Senator Sherrod Brown of Ohio, a state that has seen its manufacturing base devastated. Brown’s remarks were so poignant and timely that we have included them in their entirety below: