Could the Federal Reserve have fixed the banking system?
On December 5, 2008, the Federal Reserve Bank loaned the banks a grand total of 1.2 trillion dollars.
Bloomberg reports that three years later, the economy hasn’t regained much steam. The money likely prevented the meltdown of the global banking system, but Dean Baker thinks that the Federal Reserve Bank could have gotten more for their money. “This is the moment all the banks were on their backs, the FED ran to the rescue and got nothing in return.”
Baker points out that Federal Reserve Chairman Ben Bernanke could have forced the banks to change the way they do business for the long term to prevent another economic disaster.
Americans were upset by how the situation was handled, largely because the Federal Reserve handed the bank an enormous check and didn’t demand any changes.
The Federal Reserve was aware that the public wouldn’t be thrilled about all the money being spent, which is why they appeared in front of the Supreme Court demanding that they be able to keep records of the money loaned a secret. The Freedom of Information Act forced the Federal Reserve to release a 29,000-page report, documenting everything they loaned.
David Jones, a professor at the Lutgert College of business, says “It’s completely valid at some point to say who did the borrowing?” reports Newstrust.com.