We’ve learned much this past week about the magnitude of the bailout of our financial institutions and had many of our worst fears confirmed by recent economic data. It turns out that the Federal Reserve delivered an astonishing $9 trillion in short-term loans during 2008-09. That is not a misprint. Trillion. Goldman Sachs: $590 billion; Citibank: $1.8 trillion; GE: $16 billion. The magnitude of these wealth transfers has not been fully grasped or even fully discussed in the public arena.
Yet despite the enormity of this Fed rescue, our economy has stalled. As many predicted, bailing out the banks is not the same as improving the economy. While capital is making huge sumswatch the size of this year’s Wall Street bonuses—unemployment is stuck at 9.8 percent and our core sectors are suffering. Meanwhile, IPOs in Asia have raised about three times as much as IPOs in the United States this year. As an indicator of future growth, this does not bode well.
In addition to the other crises that surround us, we have a crisis of transparency. What’s shocking about the bailouts is what we still don’t know about them. We don’t know what the banks knew about impending risks as the events unfolded. We don’t know what the government officials who extended these loans asked before they handed over trillions of your dollars.
Just as I have little confidence anymore that we are given accurate information about the reality of conditions in Afghanistan, so I lack any confidence that the government officials in charge have been anything close to honest about the reality of the bailouts. Remember, part of the reason we passed fundamentally inadequate financial reform legislation is that the folks at the center of these events—Fed Chairman Ben Bernanke, Treasury Secretary Tim Geithner, Goldman Sachs CEO Lloyd Blankfein, and GE CEO Jeffrey Immelt—fought vigorously to keep from the public the critical information about the loans and support they received.
So here is my proposal: In the waning days of the Democratic majority in the House, the relevant committees should require testimony from each of these individuals and subpoena every company that received more than $50 billion of loans and require that all their relevant accounting documents—sufficient to understand their condition at the end of each quarter in 2007, 2008 and 2009 be made public. The House should also subpoena and make public all e-mails between these companies and any government agency, about the need for financial support and the prospects for the company absent federal assistance. (I should note that the equivalent documents about the AIG bailout have still not been made available.)
These central figures have been given a free pass about the events surrounding one of the largest, most secret wealth transfers in history. The lines of inquiry are obvious, and the information provided by the release of this data will be fascinating.
Do not forget: Virtually all the major players who brought us into the crisis are still there: the government officials, the CEOs, the investment bankers. The permanent plutocracy has survived unscathed. At a minimum, American citizens are entitled to know what happened.