In Mathew Cardinale’s article “First Federal Reserve Audit Reveals Trillions in Secret Bailouts,” he wrote that the audit of the Federal Reserve “revealed 16 trillion dollars in secret bank bailouts” (8/28/2011). He described how many financial institutions would boast that they had plenty of cash in their reserves while they were actually receiving loans. Sixteen trillion dollars is an extreme amount to be loaned out, and Cardinale explained that, “overall, the greatest number of borrowing was done by a number of small institutions. Over three years Citigroup borrowed a total of 2.3 trillion dollars; Morgan Stanley borrowed two trillion” and “The majority of the loans were issued by the Federal Reserve bank of New York” (8/28/11). Cardinale’s argument is that lending and borrowing on this scale illustrates the weakness in our financial sector.
Although the banks here at home were taking out massive loans from the Fed, they were not the only ones. Financial institutions abroad were also taking advantage of the bailout; the United Kingdom, France, and Germany were just a few of the countries that received Federal money. “The Federal Reserve has never explained how they justified several of the emergency loans, or how they decided to provide assistance to certain firms but not others” (8/28/11). Without a formal justification from the Fed, Cardinale’s sources had some opinions of their own. Some said it was simply a “lack of congressional oversight” while other claimed that it was “a clear case of socialism”. The Federal Reserve clearly has some restructuring to do, and according to the audit report notes all of the loans are being repaid or have already been repaid.
Title: First Federal Reserve Audit Reveals Trillions in Secret Bailout
Source: Inter Press Service August 28, 2011
Author: Mathew Cardinale
Student Researcher: Nicole Trupiano, Sonoma State University
Faculty Evaluator: Peter Phillips, Sonoma State University