European economic doom, gloom and crisis at a peak

U.S. credit posture precarious in crunch

Brussels – Representatives of the key PIIGS nations – Italy and Spain – blew up and blew out of the European Union economic summit on Thursday.

Their demand: A lower cost of credit charged by the European paymaster, Germany.

Italian Prime Minister Mario Monti and his Spanish counterpart, Mariano Rajoy, refused to sign off on a $149 billion growth package until Germany in turn approved short-term measures to ease their cost of credit, according to news reports.

“There's an epic battle going on between those who seek immediate and unconditional solidarity and those who seek to fundamentallly change the way European economies are run and put Europe on a course of stability, discipline, and growth,” said one official after 8 hours of stormy debate. (click here for an update on an audit the Fed bill pending in Congress)

What is the source of that stability to be?

Most Americans had no idea that the Federal Reserve had loaned some $16 trillion in secret to foreign central banks and the U.S. Banks that were too big to fail in an effort to prop up foreign banks and forestall a cascading series of failures during the years 2007-2010, worst economic crisis since the Great Depression.(click here for a previous report)

A Government Accountability Office released the figures in July of 2011 after an amendment to the Dodd-Frank Wall Street Reform Law forced the audit.

Said Sen. Bernie Sanders (I-Vt), the amendment's sponsor, “This is a clear case of socialism for the rich and rugged, you're on-your-own individualism for everyone else.”

A few samples of the type of favoritism and under-the-table double dealing uncovered:

• The CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. JP Morgan served as one of the clearing banks for the Fed's emergency lending programs.

• On Sept. 19, 2008, William Dudley, the present New York Fed President, got a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. The reason: Making Mr. Dudley sell his holdings may have created an appearance of a conflict of interest.

• The Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest which were made in secret at the time.

• The Fed outsourced all of its emergency lending operations to JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates.

• Nearly two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of mortgage insurer AIG.

• In 2008-2009, the Fed directed the Federal Reserve Bank of New York to buy mortgage-backed derivative securities in an effort to shore up the housing market. At the time, present Treasury Secretary Tim Geithner was Chairman of the Federal Reserve Bank of New York.
  
  
  
  
  In remarks on the floor of the upper chamber, Sen. Sanders sized the situation up this way. (Click here for a news report)