Has anyone heard about these results from this audit done on the fed?
When the Federal Reserve launched an unprecedented series of interventions in the financial system in 2008, it often moved so quickly that the usual practices for preventing conflicts of interest couldn’t keep up, according to a new report.
An audit of the Fed’s emergency lending programs by the Government Accountability Office, ordered by the financial reform law passed last year and released Thursday, reports generally sound financial management by the central bank as it undertook programs that deployed trillions of dollars to backstop a faltering financial system. But it brings to light difficult issues that arose when the Fed undertook actions that its rules never envisioned.
For instance, William C. Dudley, the president of the Federal Reserve Bank of New York who was a senior official there in 2008, owned stock of American International Group before the Fed bailed out the giant insurance firm. The GAO report did not mention him by name, but Sen. Bernie Sanders (I-Vt.), who spearheaded the audit, identified Dudley as the unnamed official described in the report.
Lawyers at the New York Fed allowed Dudley to continue owning the shares while working on issues relating to the bailout. They concluded that for him to sell the shares immediately after the central bank bailed out the firm would be more ethically problematic than simply holding onto them and selling at a later date.
Dudley “held shares in these companies as part of his personal portfolio that predated his service at the New York Fed,” a spokesman for the central bank said. “A waiver was granted allowing him to hold these shares based in part on the judgement that had he sold these shares immediately after the interventions it would have the appearance of a conflict.”
The GAO report did not condemn the Fed’s actions, it simply illuminated them. Dudley has subsequently sold all the shares on dates agreed to with the bank’s ethics officers, the spokesman said.
The GAO also recommended that the Fed make clearer and more rigorous its policies for hiring independent contractors to manage investment programs. During the crisis, the New York Fed hired outside firms to manage many of its special lending programs, such as one designed to backstop the market for short-term corporate loans, without holding a normal bidding process for the contracts.
The report also found that lines of authority between the Fed’s Board of Governors in Washington and the 12 regional Fed banks around the country were sometimes muddled during the crisis. For example, it was not always clear where authority resided on questions of what collateral would be adequate for an emergency loan.
The report was the latest to detail aspects of the Fed’s actions during the financial crisis that were shrouded in mystery at the time. Another provision in last year’s Dodd-Frank Wall Street regulatory overhaul, also instigated by Sanders, required the disclosure of what individual banks and other entities received loans from the Fed.
“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” Sanders said in a statement. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”
The Fed’s general counsel, Scott Alvarez, said in a letter responding to the GAO’s audit that officials will “strongly consider” the recommendations.
When I googled it none of those sources came up. How many pages did you have to go back to find those? I went to about page 5 of hits and gave up looking for a more mainstream source. I did say that I found it on Huffington : ), I went directly to wsj and searched for a story on their site, nothing came up. I also checked yahoo since that is my home page on my computer. Maybe you used different search terms. I used Fed audit, Bernie Sanders, and or $16 Trillion.Edited to add:
I rechecked the Huffington link & it opened for me. I used Google, then click on News. I searched FED audit.Here's the link to Google News prior to search...http://news.google.com/nwshp?hl=en&tab=wnAccording to the following link >"Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress."< More info. at link......Federal Reserve Bank Ownershiphttp://www.factcheck.org/2008/03/federal-reserve-bank-ownership/