The Veil of Secrecy at the Fed Has Been Lifted, 
Now It's Time for Change
Sen. Bernie Sanders
Huffington Post
November 2, 2011
http://www.huffingtonpost.com/mobileweb/rep-bernie-sanders/the-veil-of-secrecy-at-th_b_1072099.html

As a result of the greed, recklessness, and illegal
behavior on Wall Street, the American people have
experienced the worst economic crisis since the Great
Depression. Millions of Americans, through no fault of
their own, have lost their jobs, homes, life savings,
and ability to send their kids to college. Small
businesses have been unable to get the credit they need
to expand their businesses, and credit is still
extremely tight. Wages as a share of national income are
now at the lowest level since the Great Depression, and
the number of Americans living in poverty is at an all-
time high.

Meanwhile, when small-business owners were being turned
down for loans at private banks and millions of
Americans were being kicked out of their homes, the
Federal Reserve provided the largest taxpayer-financed
bailout in the history of the world to Wall Street and
too-big-to-fail institutions, with virtually no strings
attached.

Over two years ago, I asked Ben Bernanke, the chairman
of the Federal Reserve, a few simple questions that I
thought the American people had a right to know: Who got
money through the Fed bailout? How much did they
receive? What were the terms of this assistance?

Incredibly, the chairman of the Fed refused to answer
these fundamental questions about how trillions of
taxpayer dollars were being spent.

The American people are finally getting answers to these
questions thanks to an amendment I included in the Dodd-
Frank financial reform bill which required the
Government Accountability Office (GAO) to audit and
investigate conflicts of interest at the Fed. Those
answers raise grave questions about the Federal Reserve
and how it operates -- and whose interests it serves.

As a result of these GAO reports, we learned that the
Federal Reserve provided a jaw-dropping $16 trillion in
total financial assistance to every major financial
institution in the country as well as a number of
corporations, wealthy individuals and central banks
throughout the world.

The GAO also revealed that many of the people who serve
as directors of the 12 Federal Reserve Banks come from
the exact same financial institutions that the Fed is in
charge of regulating. Further, the GAO found that at
least 18 current and former Fed board members were
affiliated with banks and companies that received
emergency loans from the Federal Reserve during the
financial crisis. In other words, the people
"regulating" the banks were the exact same people who
were being "regulated." Talk about the fox guarding the
henhouse!

The emergency response from the Fed appears to have
created two systems of government in America: one for
Wall Street, and another for everyone else. While the
rich and powerful were "too big to fail" and were given
an endless supply of cheap credit, ordinary Americans,
by the tens of millions, were allowed to fail. They lost
their homes. They lost their jobs. They lost their life
savings. And, they lost their hope for the future. This
is not what American democracy is supposed to look like.
It is time for change at the Fed -- real change.

Among the GAO's key findings is that the Fed lacks a
comprehensive system to deal with conflicts of interest,
despite the serious potential for abuse. In fact,
according to the GAO, the Fed actually provided conflict
of interest waivers to employees and private contractors
so they could keep investments in the same financial
institutions and corporations that were given emergency
loans.

The GAO has detailed instance after instance of top
executives of corporations and financial institutions
using their influence as Federal Reserve directors to
financially benefit their firms, and, in at least one
instance, themselves.

For example, the CEO of JP Morgan Chase served on the
New York Fed's board of directors at the same time that
his bank received more than $390 billion in financial
assistance from the Fed. Moreover, JP Morgan Chase
served as one of the clearing banks for the Fed's
emergency lending programs.

Getting this type of disclosure was not easy. Wall
Street and the Federal Reserve fought it every step of
the way. But, as difficult as it was to lift the veil of
secrecy at the Fed, it will be even harder to reform the
Fed so that it serves the needs of all Americans, and
not just Wall Street. But, that is exactly what we have
to do.

To get this process started, I have asked some of the
leading economists in this country to serve on an
advisory committee to provide Congress with legislative
options to reform the Federal Reserve.

Here are some of the questions that I have asked this
advisory committee to explore:

1. How can we structurally reform the Fed to make our
nation's central bank a more democratic institution
responsive to the needs of ordinary Americans, end
conflicts of interest, and increase transparency? What
are the best practices that central banks in other
countries have developed that we can learn from?
Compared with central banks in Europe, Canada, and
Australia, the GAO found that the Federal Reserve does
not do a good job in disclosing potential conflicts of
interest and other essential elements of transparency.

2. At a time when 16.5 percent of our people are
unemployed or under-employed, how can we strengthen the
Federal Reserve's full-employment mandate and ensure
that the Fed conducts monetary policy to achieve maximum
employment? When Wall Street was on the verge of
collapse, the Federal Reserve acted with a fierce sense
of urgency to save the financial system. We need the Fed
to act with the same boldness to combat the unemployment
crisis.

3. The Federal Reserve has a responsibility to ensure
the safety and soundness of financial institutions and
to contain systemic risks in financial markets. Given
that the top six financial institutions in the country
now have assets equivalent to 65 percent of our GDP,
more than $9 trillion, is there any reason why this
extraordinary concentration of ownership should not be
broken up? Should a bank that is "too big to fail" be
allowed to exist?

4. The Federal Reserve has the responsibility to protect
the credit rights of consumers. At a time when credit
card issuers are charging millions of Americans interest
rates of 25 percent or more, should policy options be
established to ensure that the Federal Reserve and the
Consumer Financial Protection Bureau protect consumers
against predatory lending, usury, and exorbitant fees in
the financial services industry?

5. At a time when the dream of homeownership has turned
into the nightmare of foreclosure for too many
Americans, what role should the Federal Reserve be
playing in providing relief to homeowners who are
underwater on their mortgages, combating the foreclosure
crisis, and making housing more affordable?

6. At a time when the United States has the most
inequitable distribution of wealth and income of any
major country, and the greatest gap between the very
rich and everyone else since 1928, what policies can be
established at the Federal Reserve which reduces income
and wealth inequality in the U.S?

Given the growth of the Occupy Wall Street movement and
given the concerns of millions of Americans about Wall
Street, we now have a unique opportunity to make
significant changes to one of the most powerful and
secretive agencies of the federal government. One thing
is abundantly clear: Americans deserve a Federal Reserve
that works for them, not just the CEOs on Wall Street.

___________________________________________

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