It seems like every day one reads about the Federal Reserve, one finds out just how much it is able to do without making it known to the American people. This week, it was revealed that, between 2007 and 2010, during the height of the financial meltdown and the recession that followed, the Fed gave out $16 trillion in loans to foreign and domestic banks in an effort to keep them afloat.
According to the Government Accountability Office (GAO), $3.08 trillion of that money went to prop up banks in nations like Britain, France, Germany, Switzerland, and Belgium. To make matters worse, the Fed even outsourced some of its financial oversight to the same banks that were the hardest hit by the financial meltdown of 2008, and the contracts for these services were awarded on a no-bid basis, thus making the contracts more expensive than they ever needed to be.
The GAO conducted this audit as part of the Dodd-Frank financial reform bill, a provision that was protested by the Federal Reserve (shocking, isn't it?), but was nevertheless included into the bill. The report also made suggestions on how to reform the Fed to increase transparency and accountability in its emergency money lending programs, including an improved record-keeping system that makes it easier to track where the money is going, and who is receiving it, to avoid potential conflicts of interest.
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