A limited audit of the Federal Reserve Bank, conducted as part of recent ‘bank reform’ legislation, revealed that the Fed had lent some $16 trillion to US and foreign banks between 2007 and 2010.
This shouldn’t really be a surprise: bits and pieces about how the Federal Reserve was throwing money around in an effort to restart the economy appeared from time to time. But since it’s a story that requires more than eight seconds to explain, the media didn’t really say very much about it.
OK: the Fed did what it’s supposedly intended to: maintain the money supply as the cornerstone of a functioning economy. But in September 2008, when we were told that the would would come to an end if the government didn’t allocate $700 billion right this instant to bail out banks and insurance companies, we were being played for fools.
If the government hadn’t allocated the funds, the Fed would have. It would make their $16 trillion pot a little more risky, which would have tweaked interest rates up a bit. But life, and the economy, would have gone on.
We won’t get fooled again… I hope.
But beyond that, the actions of the Fed reveal that it doesn’t really matter what the government does: the Fed, and the banks, will do what they want anyway.