by Common Dreams
June 12, 2012
'Inherent conflicts of interest' in 2008
bailout aftermath revealed
A report released today by US Senator Bernie Sanders (I-Vt.) has
revealed the names of 18 former and current directors from
Banks who directly benefited from financial bailouts after the 2008 crisis.
The Reserve directors worked in banks and
corporations that collectively received over $4 trillion in bailout money
allocated by the Federal Reserve.
Jamie Dimon, chairman and
chief executive of JP Morgan Chase,
and and other Fed board
members' benefited from Fed actions.
Essentially, action taken by the Federal Reserve
overwhelmingly benefited directors of the Federal Reserve, above other
report titled 'Jamie Dimon Is Not Alone'
names the top 18 Reserve directors including Jamie Dimon who received
the largest Federal Reserve loans and other financial assistance during the
"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," Sanders said.
Senator Bernie Sanders:
Fed Board Member Conflicts Detailed by GAO - Banks and
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,
according to Government Accountability Office records made public for
the first time today by Sen. Bernie Sanders.
On the eve of Senate testimony by JPMorgan Chase CEO Jamie Dimon,
Sanders (I-Vt.) released the detailed findings on Dimon and other Fed
board members whose banks and businesses benefited from Fed actions.
A Sanders provision in the Dodd-Frank Wall Street Reform Act required
Government Accountability Office to
investigate potential conflicts of interest.
The Oct. 19, 2011 report by
the non-partisan investigative arm of Congress laid out the findings,
but did not name names.
released the names.
"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," Sanders said.
The GAO study found that allowing members of
the banking industry to both elect and serve on the Federal Reserve's
board of directors creates "an appearance of a conflict of interest" and
poses "reputational risks" to the Federal Reserve System.
In Dimon's case, JPMorgan received some $391 billion of the $4 trillion
in emergency Fed funds at the same time his 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
Dimon also got the Fed to provide JPMorgan
Chase with an 18-month exemption from risk-based leverage and capital
requirements. And he convinced the Fed to take risky mortgage-related
assets off of Bear Stearns balance sheet before JP Morgan Chase acquired
the troubled investment bank.
Another high-profile conflict involved Stephen Friedman, the former
chairman of the New York Fed's board of directors. Late in 2008, the New
York Fed approved an application from Goldman Sachs to become a bank
holding company giving it access to cheap loans from the Federal
Reserve. During that period, Friedman sat on the Goldman Sachs board.
He also owned Goldman stock, something that
was prohibited by Federal Reserve conflict of interest regulations.
Although it was not publicly disclosed at the time, Friedman received a
waiver from the Fed's conflict of interest rules in late 2008.
Unbeknownst to the Fed, Friedman continued
to purchase shares in Goldman from November 2008 through January of
2009, according to the GAO.
In another case, 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
Sanders on May 22 introduced
legislation to prohibit banking
industry and business executives from serving as directors of the 12
Federal Reserve regional banks.