GAO Finds Serious Conflicts at the Fed | The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve

GAO Finds Serious Conflicts at the Fed  

WASHINGTON, Oct. 19 – A new audit of the Federal Reserve released today detailed widespread conflicts of interest involving directors of its regional banks.

“The most powerful entity in the United States is riddled with conflicts of interest,” Sen. Bernie Sanders (I-Vt.) said after reviewing the Government Accountability Office report. The study required by a Sanders Amendment to last year’s Wall Street reform law examined Fed practices never before subjected to such independent, expert scrutiny.

The GAO 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.  “Clearly it is unacceptable for so few people to wield so much unchecked power,” Sanders said. “Not only do they run the banks, they run the institutions that regulate the banks.”

Sanders said he will work with leading economists to develop legislation to restructure the Fed and bar the banking industry from picking Fed directors. “This is exactly the kind of outrageous behavior by the big banks and Wall Street that is infuriating so many Americans,” Sanders said.

The corporate affiliations of Fed directors from such banking and industry giants as General Electric, JP Morgan Chase, and Lehman Brothers pose “reputational risks” to the Federal Reserve System, the report said. Giving the banking industry the power to both elect and serve as Fed directors creates “an appearance of a conflict of interest,” the report added.

The 108-page report found that at least 18 specific 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 the dry and understated language of auditors, the report noted that there are no restrictions in Fed rules on directors communicating concerns about their respective banks to the staff of the Federal Reserve. It also said many directors own stock or work directly for banks that are supervised and regulated by the Federal Reserve.  The rules, which the Fed has kept secret, let directors tied to banks participate in decisions involving how much interest to charge financial institutions and how much credit to provide healthy banks and institutions in “hazardous” condition. Even when situations arise that run afoul of Fed’s conflict rules and waivers are granted, the GAO said the waivers are kept hidden from the public.

The report by the non-partisan research arm of Congress did not name but unambiguously described several individual cases involving Fed directors that created the appearance of a conflict of interest, including:

  • ·        Stephen Friedman In 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap Fed loans.  During the same period, Friedman, chairman of the New York Fed, sat on the Goldman Sachs board of directors and owned Goldman stock, something the Fed’s rules prohibited.  He received a waiver in late 2008 that was not made public. After Friedman received the waiver, he continued to purchase stock in Goldman from November 2008 through January of 2009 unbeknownst to the Fed, according to the GAO.
  • ·        Jeffrey Immelt The Federal Reserve Bank of New York consulted with General Electric on the creation of the Commercial Paper Funding Facility.  The Fed later provided $16 billion in financing for GE under the emergency lending program while Immelt, GE’s CEO, served as a director on the board of the Federal Reserve Bank of New York.
  • ·        Jamie Dimon The CEO of JP Morgan Chase served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed and was used by the Fed as a clearing bank for the Fed’s emergency lending programs. In 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns. At the time, Dimon persuaded the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements.  He also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank.

Read a more detailed analysis of the GAO report prepared for Sen. Sanders the full GAO report below…

~

4closureFraud.org

~

The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve

FEDERAL RESERVE BANK GOVERNANCE GAO REPORT

Comments
8 Responses to “GAO Finds Serious Conflicts at the Fed | The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve”
  1. There are 2 kinds of citizens in America the regular citizen and the platinum citizen, The Regular Citizens: Homeowners with fixed mortgages sat on rapidly depreciating homes in neighborhoods rife with foreclosures. Once the music stopped, they couldn’t borrow against their homes at all, but if they wanted to get credit through credit cards, the interest rate could be upwards of 30%. This is sad, but it’s not inherently immoral. It’s what happens in a typical financial panic. The platinum Citizens: Bankers who also had depreciating assets – they owned subprime mortgage debt, and they had fixed obligations as well. But if they wanted to borrow, the Federal Reserve and the Treasury make sure that they could as much credit as they wanted, against whatever collateral they had, for basically nothing, nada zero, zip.

  2. housemanrob says:

    ……..the thieves are like fireflies………they are everywhere…….

  3. abs says:

    State cannot foreclose due to investment tied to the banks (corruption). Now that Federal court or AG could be disqualify for settlement talk. Before the settlement can resume all bailout have to be retracted, stripped, taken away and any GS to bank must cease and decease.

  4. lvent says:

    The FED are a private bank owned by the World Bank which is owned by the New World Order…The FEDERAL RESERVE IS UNCONSTITUTIONAL AND THEREFORRE ILLEGAL….

    • lvent says:

      ABOLISH THE FED…..!!!!!!! CONGRESS MUST ISSUE OUR OWN CURRENCY…AS THE U.S. CONSTITUTION REQUIRES….NO MORE ALLOWING THE FEDERAL RESERVE TO PRINT MONEY OFF OF THE FULL FAITH AND CONFIDENCE, AKA CREDIT…. OF THE US. TAXPAYER…….THEY ARE CRIMINALS….AND THEY DON’T PLAY FAIR AND THEY DON’T SHARE WITH THE 99%….THEY STEAL ALL OF THE INTEREST MONEY…MAKE MONEY OFF OF THAT INTEREST BY LENDING IT TO THEIR CRIMINALS FRIENDS ON WALL STREET AT ALMOST ZERO INTEREST…… AND THEY STEAL AND HOARD ALL OF THE WEALTH THEY MAKE OFF OF ALL OF US, FOR THEMSELVES AND THEIR OTHER CRIMINALS FRIENDS….IN THE NWO….!!!…..

  5. Mrs Doughtfire says:

    For some reason, I am not surprised at all. We already had a inkling that the bankers had their people in the fed to make sure they were taken care of. Time to clean the slate and start over. Let the bankers hang and everyone else tied to them for their crimes againsed the people

  6. Sam Forsythe says:

    Incredible, if only we the “deadbeats” had that kind of access. The Fed appears to be the personal Piggy Bank for royalty.
    I’m sure folks like Immelt will claim ithey do ‘God’s Work’ or it’s all perfectly legitimate, or the “data
    says the world would have collapsed if they hadn’t done these things to rescue themselves. One must wonder why these same Elite feel that people need to have their modest homes taken from them, to be accused of being irresponsible, or to be enslaved in debt and to needlessly suffer. These guys took trillions yet somehow the serfs are responsible? REBEL!!

Leave a Reply