MR. LACKER. If I could just follow up on that, Mr. Chairman.
CHAIRMAN BERNANKE. Yes, go ahead.
MR. LACKER. Vice Chairman Geithner, did you say that they are unaware of what we’re considering or what we might be doing with the discount rate?
VICE CHAIRMAN GEITHNER. Yes.
MR. LACKER. Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.
Oh I see.
Jeffrey Lacker, the head of the Richmond Fed, originally raised the allegation during a Fed conference call in August 2007, and he stuck to his 5-year-old claim against the current U.S. treasury secretary in a statement provided to Reuters on Friday.
“From conversations I had prior to the video conference call on August 16, 2007, I was aware of discussions among a few large banks about borrowing from their discount windows to support the asset backed commercial paper market,” Lacker said in the statement. “My understanding was that (New York Fed) President Geithner had discussed a reduction in the discount rate with these banks in connection with these initiatives.”
If you or I were to do something like this we’d go directly to jail, especially if we traded on it, and it is clear that many people did.
If you remember, this was the infamous August 17th Discount Rate Cut that buried myself and a huge number of other people who were short (and correctly so) at the time. The market inexplicably rose into the close on the 16th — and then the hammer came down on the 17th before the open.
So may I ask two questions:
- Why is Geithner not under indictment?
- Why have none of the other FOMC members been held to account for misprison on this event, which they all heard on the conference callincluding the Chairman, and thus have all been aware of — and done nothing about — for the last five years?
Mother should I trust the government?
Answer: Not as far as you can throw it.
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