Federal Reserve Chairman Ben Bernanke says he doesn’t know which foreign banks got more than half a trillion dollars of Fed credit swaps.
Congressman Alan Grayson (D-Fla.) asked Bernanke to name which financial institutions received the money, Bernanke answered, “I don’t know.” Bernanke was under oath.
“Half a trillion dollars and you don’t know who got the money?” asked Grayson, in a C-SPAN clip widely circulated on the Web.
Bernanke testified that the Fed has a “long standing legal authority” to hand money to foreign banks — a claim contradicted by his own written report.
Grayson brought up a $9 billion dollar Fed package to New Zealand, a windfall of about $3,000 for every New Zealander.
“Wouldn’t it have been better to extend that kind of credit to Americans rather than New Zealanders?” Grayson asked.
“Do you think it’s in the spirit of the Constitution for a group like the FOMC to hand out a half a trillion dollars to foreigners without any action by this Congress?”
Bernanke contended that Congress gave the central bank the authority to give money away under the Federal Reserve act of 1913. Grayson noted that, in 1913, the entire GDP of the U.S. was well under half a trillion dollars.
“Is it safe to say that nobody in 1913 contemplated that a small little group of people would decide to hand out half a trillion dollars to foreigners?” asked Grayson.
Bernanke again claimed that the authority had been used numerous times before, an assertion Grayson demonstrated was false by pointing to Bernanke’s own report, which stated that the entire amount had been handed out starting from the last quarter of 2007, and that the amount given out before to foreign banks was zero.
“The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen,” said Congressman Ron Paul (R-Tex.) at the House Financial Service Committee hearing.
“Instead of economic growth and stable prices, (the Fed) has given us a system of government and finance that now threatens the world financial and political institutions.”
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