Glenn Greenwald has a fascinating piece yesterday about the Inspector General overseeing the administration of the funds used for the financial bailout. He’s writing about the attack being made on the IG’s independence (the Obama Administration wants the guy placed under the direction of the Treasury Department) but in the process he brings out some interesting numbers about the bailout itself.
You really should read the piece, and the podcast at the end is well worth listening to, but to focus on the numbers here.
Congress authorized $700 billion to bail out financial institutions. What has actually been spent is $3 trillion, $2.3 trillion more than authorized by our elected government, or 328% over budget. Who injected that money? The Federal Reserve and the FDIC.
In addition to the $3 trillion expended, our government has created an additional $20.7 trillion in financial exposure, something like you create when you cosign a loan; you are on the hook for the money if the borrower defaults. That exposure was not authorized by our elected government either, but by the Fed and the FDIC.
What’s being done with that money which, let us remember, was for the purpose of stimulating lending? The Treasury Department says that we cannot know and that it’s silly to even ask. The IG came up with a novel idea of simply asking the banks what they are doing with it. Turns out some of it is being lent, some is being used to buy up smaller banks, and some is simply being held.
Treasury wants to give the Fed, who have already handed out $3 trillion and put us at risk for $20 trillion more, more authority and power; and wants the IG to shut up.