Monday, June 18, 2012

Corruption, American Style

Last week, Bernie Sanders released "Jamie Dimon is Not Alone," a list of the banks and businesses that were handed almost $4 trillion in bailout money after the 2008 crash, many of whom were current and former Federal Reserve regional bank directors (i.e., the people deciding to whom to give the money).  The one-sentence abstract to Sanders' report:

During the financial crisis, at least 18 former and current directors from Federal Reserve Banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve.
That's chilling.  An image of bankers writing themselves blank checks comes into focus after several years of vague generalizations about where the bailout money went.  Sanders says:
"This report reveals the inherent conflicts of interest that exist at the Federal Reserve.  At a time when small businesses could not get affordable loans to create jobs, the Fed was providing trillions in secret loans to some of the largest banks and corporations in America that were well represented on the boards of the Federal Reserve Banks.  These conflicts must end."
I doubt they will end, no matter how many lists are produced.  Sanders has proposed legislation to ban bank and business executives from serving on Federal Reserve bank boards:
No employee of a bank holding company or other entity regulated by the Board of Governors of the Federal  Reserve System may serve on the board of directors of any Federal reserve bank.  
No employee of the Federal Reserve System or board member of a Federal reserve bank may own any stock or invest in any company that is regulated by the Board of Governors of the Federal Reserve System, with-out exception.’’
But it's the age-old problem of expertise in governance.  If you ban the people who know how the system works, who is left to run the system?  If you let the people who know how to run the system run it, who will oversee with a sufficiently knowledgeable critical eye?

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