The Federal Reserve Board directed the FRBNY (Federal Reserve Bank of New York) to implement most of the emergency actions that authorized loans to banks in order to stabilize financial markets in 2008.
One of the recommendations of the GAO, amongst others, was that the Federal Reserve needs to strengthen conflict of interest policies. Other recommendations include strengthening risk management and strengthening procedures to manage program access for higher-risk borrowers. Also the GAO said that more transparency and accountability was needed.
Part of the Federal Reserve mandate includes protecting the credit rights of consumers and managing the nation's money supply to achieve maximum employment, stable prices and moderate long-term interest rates. These goals were sadly lacking in the actions performed by the Federal Reserve emergency loan system.
From the alphabet soup of loan programs created by the Federal Reserve, Goldman Sachs's total transactions across emergency programs (aggregate borrowings) from December 2007 to July 2010, amounted to a total of $814 billion ($589 billion from the Primary Dealer Credit Facility, PDCF and $225 billion from the Term Securities Lending Facility, TSLF). Goldman Sachs was paid a total of $11,157,426 in fees from 2008 to 2010.
Dudley, who joined the Federal Reserve in 2007 at Geithner's request, was a Goldman Sachs partner for 10 years before that. In 2009, he became the President of the Federal Reserve Bank of NY. If there were another financial crisis, would you think Dudley is free from conflicts of interest?
Senator Bernie Sanders on his website tells us more:
The Fed Audit
By Bernie Sanders - Website
July 21, 2011
The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."
Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.
The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.
For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.
In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.
To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said.
The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.
Read more here