FedUpUSA

Archive for January 26th, 2010

Is Bernanke Hiding A Smoking Gun?

Ryan Grim - Huffington Post

A Republican senator said Tuesday that documents showing Federal Reserve Board Chairman Ben Bernake covered up the fact that his staff recommended he not bailout AIG are being kept from the public. And a House Republican charged that a whistleblower had alerted Congress to specific documents provide “troubling details” of Bernanke’s role in the AIG bailout.

Sen. Jim Bunning (R-Ky.), a Bernanke critic, said on CNBC that he has seen documents showing that Bernanke overruled such a recommendation. If that’s the case, it raises questions about whether bailing out AIG was actually necessary, and what Bernanke’s motives were.

A letter Bunning sent Monday to Banking Committee Chairman Chris Dodd (D-Conn.) also refers to an “[e]mail exchange regarding restructuring of assistance to AIG, initiated by Treasury Secretary Timothy Geithner” in March 2009.

Senators will be voting on Bernanke’s confirmation for a second term in the coming days. But only senators on the Banking Committee have had access to documents that illuminate just what decisions he made and how he made them. And that access only came after Bunning publicly complained that Dodd and Sen. Richard Shelby (R-Ala.) were the only members of the committee could see them.

Meanwhile, Rep. Darrell Issa (R-Calif.), who has been investigating the AIG bailout in his role as ranking Republican on the House Oversight and Government Reform Committee, said that a whistleblower has informed him of “troubling details” of Bernanke’s role in the bailout.

There may be nothing incriminating in the documents, but without access to them, the Senate will be voting to confirm him in the dark.

Senators from both parties who say they will vote to confirm Bernanke credit him with deft actions that averted a second Great Depression. Those actions, they argue, outweigh what blame he deserves for causing the crisis in the first place.

“He’s done a very good job in the last year. And but for his work, we would be in a very different position in this country today,” said Dodd Monday. “Now that’s hard to prove a negative. But the fact of the matter is, our entire financial system might have collapsed but for his leadership.”

On Monday, Bunning sent a letter to Dodd, asking him to subpoena the emails and other documents. Bunning and other committee members have thus far had to view the documents at the Federal Reserve and are bound by confidentiality from revealing their contents. “He thinks that all members of the Senate should have access to the documents he’s seen,” said Bunning spokesman Mike Reynard.

Issa, in a letter to his committee’s chairman, Ed Towns (D-N.Y.), asked for a similar subpoena and even specified exactly which documents he wants: Those tagged electronically as “sb-aig-01000092 to sb-aig-010000125″ and “Draft Memo on AIG.pdf.”

Towns spokeswoman Jenny Rosenberg said that Towns would decide on a subpoena after Wednesday’s hearing on the AIG bailout.

Bunning, in his letter to Dodd, is equally specific, citing nine particular documents that the Senate should review before voting to confirm Bernanke:

1. Agenda and materials for 11/12/2008 meeting of the Board of Directors of AIG (containing minutes of previous board meetings). [AIG_11.12.08_BOD.pdf] 

2. Agenda and materials for 1/14/2009 meeting of the Board of Directors of AIG (containing minutes of previous board meetings). [AIG_01.14.09_BOD.pdf]

3. Memo “Issues Related to Possible IPC Lending to American International Group” presented to the Board of Governors for approval of lending to AIG, dated 9/15/2008. [pages sb-aig-01000092 to sb-aig-01000125]

4. Email from Chairman Bernanke including a draft of the memo to be presented to the Board of Governors for approval of lending to AIG, dated 9/15/2008. [Draft Memo on AIG.pdf]

5. Memo “Proposed Securities Lending Facility for American International Group, Inc. (“AIG”)” presented to the Board of Governors for approval of the securities lending facility for AIG, dated 10/6/2008. [Board Mtg_10-6-2008_8.35.05_AM.pdf]

6. Memo “Proposed Steps to Stabilize American International Group, Inc.” presented to the Board of Governors for approval of restructuring assistance to AIG and creation of Maiden Lane II & III, dated 11/6/2008. [AIG restructuring Board memo Final (Nov. 6, 2008)_11-6-2008_4.55.19_PM.pdf]

7. Spreadsheet describing the assets purchased by Maiden Lane II and Maiden Lane III. [BLK_12.31.08_MLII & III cusip data.xls]

8. Spreadsheet listing derivative transactions and counterparties for Maiden Lane III. [List of Derivative Transactions.pdf]

9. Email exchange regarding restructuring of assistance to AIG, initiated by Treasury Secretary Timothy Geithner, dated 03/01/2009. [AIG Emails, Part3.pdf]

Top Ten Reasons Why Bernanke Should Not be Reappointed

Today, the Alliance for Economic Stability, Inc., on its website located at www.eally.org, released a letter to Congress recommending that Federal Reserve Chairman Ben Bernanke not be reappointed citing the Chairman’s complacency before and after the crisis as the organization’s leading factor in its decision.

1. He violated the first and most important guiding principle of fair markets: he failed to make full disclosures at all points relevant to the development and management of the financial crisis.

2. Outwardly he completely failed to at his first and only responsibility: to protect American Families and Workers from excessive risk in the financial sector.

3. There has been no discovery conducted on what he knew and when, and who he told, before the crisis caused Bear Stearns, Lehman, AIG, Freddie Mac and Fannie Mae, and hundreds of banks to fail.

4. He has failed to provide a complete accounting of the total amount of subprime mortgages underwritten and a fair estimate of their current value by sponsor, including Goldman and JP Morgan.

5. He has failed to provide an accounting of the amount of sub-prime derivatives sold to deposit institutions, pension plans and insurance companies including AIG.

6. He failed to identify the beneficiaries of losses resulting from conflicts-of-interest and unethical standards before he caused the creation of new policies and laws allowing cash payments funded by tax payers to be used in transactions that generated extraordinary gains for the private parties that caused the crisis with no protection for tax payers and no penalty or sanction, or consequences, to the improperly benefited private parties.

7. He continues to engage in a manipulation of markets without any estimate of the cost to tax payers of the program or responsibility to account for the negative impact on the nation’s budget and currency value of his actions.

8. He has not proposed any enforcement action or laws that would correct the laws that allowed the crisis.

9. He denied having any responsibility in the crisis yet at the same time blamed the regulators for allowing unethical sales and trading practices and improper underwriting activities that are at the core of his super visionary duties.

10. He has resisted all efforts to increase transparency of the Fed’s controversial emergency measures, and both before and after the crisis he has been complacent about the laws that are now known to be the direct cause of the crisis and the adverse impact of his policies on conservative savers and benefits to speculators.

AES is an organization devoted to encouraging policies that protect savings and investments and that promote a fair financial marketplace. AES has produced a study of FINRA, titled “Securities Regulatory Reform: Addressing FINRA’s Inherent Conflict and Moral Hazard” and a new regulatory rules filing titled “FINRA Moral Hazard Reforms” that was entered into rulemaking by U.S. Securities and Exchange Commission on January 4, 2010.