the Coronavirus Stimulus Bill Isn’t Just a $Trillion Crony-capitalism Slush Fund


According to economists Pam Martens and Russ Martens at wallstreetonparade.com, via counterpunch.com, March 27, 2020: ‘Stimulus Bill Allows Federal Reserve to Conduct Meetings in Secret; Gives Fed $454 Billion Slush Fund for Wall Street Bailouts’

“The text of the final bill was breathtaking in the breadth of new powers it bestowed on the Federal Reserve, including the Fed’s ability to conduct secret meetings with no minutes provided to the American people.”

The bill provides specific sums that can be made as loans or loan guarantees to passenger airlines ($25 billion), cargo airlines ($4 billion), and loans and loan guarantees to businesses necessary to national security ($17 billion). But when it comes to the money going to the Federal Reserve and then out the door to Wall Street, the legislation says only this:

Not more than the sum of $454,000,000,000…shall be available to make loans and loan guarantees to, and other investments in, programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system….”

Why does the Federal Reserve need $454 billion from the U.S. taxpayer to bail out Wall Street when it has the power to create money out of thin air and has already dumped more than $9 trillion cumulatively in revolving loans to prop up Wall Street’s trading houses since September 17, 2019 – long before there was any diagnosis of coronavirus anywhere in the world.

The Fed needs that money to create more Special Purpose Vehicles (SPVs) — the same device used by Enron to hide its toxic debt off its balance sheet before it went belly up. With the taxpayers’ money taking a 10 percent stake in the various Wall Street bailout programs offered by the Fed, structured as SPVs, the Fed can keep these dark pools off its balance sheet while levering them up 10-fold.

White House Economic Adviser Larry Kudlow acknowledged plans by the Fed to leverage the money at a White House press briefing this week, stating that the money the Treasury is handing over to the Fed would result in “$4 trillion in Federal Reserve lending power.” [snip]

They describe the March 17, SPV, and a few used during the 2008-2010 financial meltdown to buy up Bear Sterns’ toxic debt and prop up AIG.

“Adding to the suspicions that the Fed doesn’t want to have to battle Freedom of Information Act (FOIA) requests (sunshine law requests) again in court, as it did and lost during the last financial crisis to keep its outrageous $29 trillion bailout program to Wall Street a secret from the public, the Senate-approved stimulus bill repeals the sunshine law for the Fed’s meetings until the President says the coronavirus threat is over or the end of this year. That could make any FOIA lawsuits to unleash details of what’s going on next to impossible since it has been codified in a federal law. The bill states the following:

SEC. 4009. TEMPORARY GOVERNMENT IN THE SUNSHINE ACT RELIEF. (a) IN GENERAL.—Except as provided in subsection 8 (b), notwithstanding any other provision of law, if the Chairman of the Board of Governors of the Federal Reserve System determines, in writing, that unusual and exigent circumstances exist, the Board may conduct meetings without regard to the requirements of section 552b of title 5, United States Code, during the period beginning on the date of enactment of this Act and ending on the earlier of— (1) the date on which the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 20 U.S.C. 1601 et seq.) terminates; or (2) December 31, 2020.

This could mean that the American taxpayer may never learn why it went into debt to the tune of $454 billion if no records are being maintained.”

 They finish by noting the mega-banks (Too Big to Fail again?) and the Federal Reserve aren’t just a threat to the soundness of the US banking system, but an unparalleled threat to the idea of democracy as we know it.  I’d take issue with both those metrics, but never mind.  They then write how hard it is to believe that Senators Bernie Sanders, Elizabeth Warren, Sherrod Brown and Jeff Merkley voted for the bill while knowing what they used to know from the last meltdown, while I’m not even mildly surprised.

 

Share
up
14 users have voted.

Comments

disrael's picture

unparalleled threat to the idea of democracy

Don't you have to have a democracy in order for it to be threatened? We don't have a democracy we have a bureaucracy. And in a bureaucracy everything the Fed is doing makes sense. If we want a democracy then our population would need jobs that are independent of our current economy.

up
4 users have voted.
wendy davis's picture

@disrael

but certainly not a democracy, which is impossible in a capitalist economy. sheldon wolin called ours Inverted Totalitarianism, 'managed democracy' or capitalism subverted by corporatocracy. but even that doesn't quite make it for me.

some sort of bottom up socialism would work for me: all people equally deserve the best simple lives possible. thanks for reading and commenting, disrael.

up
5 users have voted.

@wendy davis
"Everyone gets the same" doesn't cut it for me. But the bottom should be tolerable and the Top shouldn't be like an oriental king.
To me a ten to one range of income sounds best. I'd tolerate a hundred to one, but no more.
Call it $30,000 a year up to $300,00 a year. But no instant millionaires
And those big salaries are to rock stars and Nobel Laureates

up
2 users have voted.

We are so screwed.

wendy davis's picture

what's coming soon for the plebians; the eites believe they can escaped unscathed.

meanwhile, we help one another as we're able.

up
3 users have voted.
Lily O Lady's picture

behind the scenes. They’re spying on pretty much everything. Just a fantasy of mine, I suppose.

up
4 users have voted.

"The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

wendy davis's picture

@Lily O Lady

but i'm not grasping your wondering Q. of course the NSA knows all it desires, but in this case 'behind the scenes'?

i will say that it's just prefect that with so many states in lockdown, no one can even protest any of this in the street. in NYC bill de blasio is asking folks to call 311 to bust folks for their failures to heed the 'social distancing' rules. my favorite socialist on twitter quipped that it's the new 'stop and frisk'.

up
2 users have voted.
Lily O Lady's picture

@wendy davis

they know everyone’s secrets, even the rich and powerful. Such information might be irretrievable, but who knows? There might be a record in some archive somewhere. Of course it could be claimed that such information was merely conspiracy theory, as with the DNC emails.

So that’s me following that particular rabbit down that particular hole.

up
3 users have voted.

"The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

wendy davis's picture

@Lily O Lady

the Q is always whether or not the NSA and other NatSec agencies want to bust the oligarchs, isn't it? (barring expedience on some mission or other...) i'd imagine that those archives of bulk collection are still extant...for future use.)

but NOT, i suppose, the bulk collections emails/conversations among epstein, bill gates larry summers, et. al. before their gatherings with epstein... you might guess is just came upon a 2019 NYT article/exposé? with their photos and so on.

up
3 users have voted.
Lily O Lady's picture

@wendy davis

saw the headline.

Yeah, any compromising information is out of our reach. Too bad because TPTB are asset stripping like a venture capitalist on a recent acquisition.

up
2 users have voted.

"The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

wendy davis's picture

@Lily O Lady

will be hideous for the serfs, but the Ownership Class globally will ride the wave above us...again.

make of this what you will; i saw some incomprehensible (to me) buzz about this earlier today, jut bingled and found this at the international business times:

"The Federal Reserve announced a new facility Tuesday that will allow foreign central banks to temporarily swap holdings of US Treasury debt for US dollars.

Amid the cash crunch and increased demand for dollars caused by the uncertainty around the coronavirus pandemic, the Fed's "FIMA repo facility" will allow central banks to exchange US Treasury debt for cash, rather than selling them for bargain prices.

Along with dollar swap lines the Fed already put in place for many central banks, this operation, which begins April 6, will "help support the smooth functioning of financial markets ... and thus maintain the supply of credit to US households and businesses," the Fed said in a statement.

Like the swap lines, the new facility will be in place for at least six months. It will provide overnight lending to central banks at a modest interest rate, so the cash can then go to other institutions in those countries "to help ease strains in global US dollar funding markets," the Fed said.

The global shutdown of businesses around the world has wreaked havoc on financial markets as companies rush to secure cash to remain afloat while their sales dry up.

The US central bank, under its chairman Jerome Powell, has stepped in aggressively to try to keep the financial system from seizing up, rolling out a series of measures to pump liquidity into the market.

The Fed slashed the benchmark interest rate to zero earlier this month, announced unlimited purchases of US Treasury debt and mortgage debt, massive increases in overnight lending to banks as well as lending to companies and municipalities.", and so on.

prolly ought to look at wall street on parade to see if they've read the fine print.

but no, unless for revenge purposes, ya wouldn't want to know what lolita express man, philantrocapitalist bill gates and larry Many Hats summers might have been discussing.

Lawrence Henry Summers is an American economist, former Vice President of Development Economics and Chief Economist of the World Bank, senior U.S. Treasury Department official throughout President Clinton's administration, and former director of the National Economic Council for President Obama.

up
2 users have voted.

@Lily O Lady
but that doesn't mean they understand anything.

up
0 users have voted.

@Lily O Lady @Lily O Lady

up
0 users have voted.