by PAM MARTENS & RUSS MARTENS
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.
Wall Street on Parade for more