A little love for the Fed, a little hate on the blowhards

| Forum Editor

The Fed has recently come under intense scrutiny after it was pressured to release documents detailing where the $3.3 trillion it issued in loans went. The list of recipients was mostly what one would expect, some of what one wouldn’t. Major financial organizations like Goldman Sachs, Bank of America and JPMorgan received billions in short term loans. So did the financial arms of stalwart companies like General Electric and Verizon. What’s the big deal? Nothing really, at this point. The amount of times these companies went to the Fed for loans and the dollar amounts are certainly startling, but they’ve been almost entirely paid back, along with the payments on interest that the Fed was courteous enough to set at a crazy low rate.

So why did Senator Bernie Sanders blast the Fed on CNN’s “Parker Spitzer”? For one, massive loans were dolled out to foreign banks such as UBS and BNP Paribas. Yeah, it’s a bit questionable for our central bank to give essentially free money to foreign banks, but in this day and age, the entire world’s financial system is intertwined. And let’s not forget that these major European players were heavily involved in U.S. markets. Their collapse would have been potentially as dangerous as an American bank’s. The second potential qualm with the Fed’s lending is that those on Wall Street may have profited from loans. Take a step back here: Let’s truly analyze the problem with “profit.” First, we have to acknowledge that Wall Street is filled with a ton of really smart people who could find a way to profit off of the recycling of human feces if they really wanted to. Second, the profits came off of funds and investors betting on the success of federal government intervention! So sorry for hoping that the government’s plan to revive the economy succeeds.

Senator Sanders did his best to defend the little guy. His complaints about the Fed’s behavior also include the fact that “small businesses in Vermont and all over this country can’t get affordable loans in order to create jobs.” Well Mr. Senator, put yourself in a hypothetical situation here. Assume that the Fed didn’t bail out the banks and our entire financial system collapsed. Credit markets froze and bank assets became worthless, but the corner store in Montpelier got a small government loan. How in the hell does that help us? There’s no money left in the economy, no credit for Vermonters to buy their maple syrup, definitely still no loans to create jobs, because a loan infrastructure doesn’t exist anymore, due to the fact that the big banks that make up most of our financial system are now defunct. Clearly this leaves the country better off.

No one is perfect. Could the Fed have regulated where their loans were going? Perhaps, but my guess is that the c-suite at these firms had a much better idea of how the money could be used to save their floundering company than government officials did. While Wall Street has a reputation for being greedy, I doubt Jamie Dimon thought that lining the pockets of his Brioni suit with Fed dollars was a better plan than saving JPMorgan Chase. Skepticism is good, and most people have their faults, but at a certain point, irrational anger’s short little head bumps into the chest of rationality. There is no doubt that our economy is still struggling, that it was silly to let unemployment benefits expire in a time of need, and that people are struggling to find work and support their families. That much is indisputable. But what is also true is that the Fed, in a rather short period of time, came up with an innovative and effective way to save an industry that was on the verge of collapse. An industry that helps all of us afford to buy homes and cars and all the other crap we own. Yes, our government and economy still face major problems, but had the Fed not given free money to Wall Street, I have a feeling we’d be in a much, much worse situation. As the saying goes, we’d be up $#!^ creek without a paddle.

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