Banks on the brink. Financial system close to collapse--or so said the experts. To the rescue rode the Federal Reserve Board, which authorized trillions of dollars for all sorts of financial institutions, domestic and foreign...even if said institutions didn't need the money but were happy to take essentially free money.
That was back during the financial crisis.
Now, it's Greece and its banks running short on cash, squeezed by the money lenders and, in particular, the European Central Bank. So, why not: the Federal Reserve Board should be directed by Congress to commit to providing liquidity to Greek banks so the people in Greece--millions of human beings--can pay their bills, get their pension payments and continue to have money to buy food--or cut off the ECB from its Fed-backed line of credit
So, background to this. Bernie Sanders, almost on his own, pushed for an audit of the Fed by the General Accounting Office, which was finally published in July 2011. Part of the reason he did so is that then-Fed Chairman Ben Bernanke refused to reveal what banks had received taxpayer money, as you can see from this short clip:
To cut to the chase, the audit found that the Fed had made roughly $16 trillion in loans to a whole variety of financial institutions and corporations.
Included in the loans were credit lines totaling $8 trillion to the European Central Bank--the very institution leading the attempt to bludgeon Greece. In addition, the Fed, through a whole set of programs, made cash available--at very low interest--to the usual suspects--Bank of America, Citigroup, Wells Fargo--but also to a whole list of foreign banks including Barclays, ANZ (Australia), Bank of Montreal and others.
As the Troika--the International Monetary Fund, the European Central Bank and the European Union (with Germany leading the way)--applied pressure to Greece, Bernie Sanders wrote to the Fed Chair Janet Yellin back in February making it clear that the U.S. should not stand by while the Troika impoverished people:
The United States cannot stand idly by while the European Central Bank undermines the new democratically elected government of Greece, induces deflation and risks financial instability. President Barack Obama was right when he recently noted, with regard to Greece: ‘You cannot keep on squeezing countries that are in the midst of a depression. At some point, there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits
And he added:
Currently the Federal Reserve has a standing credit arrangement with the ECB on which the ECB can draw at any time. These swap lines, as they stand, tend to make the United States implicitly supportive of the policies that have so destabilized and damaged Greece. But, they also give us a reason, indeed an obligation, to object when a partner Central Bank departs from its commitment to financial stability.[emphasis added]
Sanders wasn't alone in Congress. A group, including Sanders,
wrote to the head of the IMF, Christine Lagarde, objecting to the IMF's hard line:
Greece has already reduced its national public sector work force by 19 percent and carried out many of the reforms demanded by the IMF and its creditors. It has gone through an enormous fiscal adjustment, achieving the largest cyclically adjusted primary budget surplus in the euro area last year; and a very large current account adjustment (with a 36 percent reduction in imports). At the same time, as even the IMF has acknowledged in its own research, the austerity imposed by Greece's creditors over the past five years turned out to be far more devastating to the economy than they had predicted.
So, this is simple. The next step should be a two-part demand from Congress:
Number One: Congress should demand that the Fed explicitly back Greece's banking system so that there is cash for the people of Greece.
Given this:
"All eyes will now be on the European Central Bank tomorrow. We expect the central bank to continue providing liquidity to Greece’s financial sector, although the small chance of the ECB increasing the cap on the emergency liquidity assistance this week has disappeared with the referendum result," said Iscaro in a note this evening.
"This significantly raises the probability of banks running out of cash over the coming days. We estimate it is very likely banks will not reopen on 7 July as currently expected. Moreover, the limit on bank withdrawals, currently at €60, may also need to be reduced."[emphasis added]
Number Two:
Congress should demand that the Fed inform the ECB that, unless the ECB negotiates a deal acceptable to Greece--that removes the cuts in pensions, cuts in minimum wage and promotes economic growth not austerity--then, the Fed will end the ECB's access to OUR FUCKING MONEY.
Please don't buy into the myth of "Fed independence". Congress has substantial power over the Fed, which is its creation and is subject, as the GAO investigation shows, to audits and oversight.
Of course, I know the two-part proposal would face a heavy slog--the Fed's Board of Governors and its counterpart at the ECB, at heart, share the same philosophy that pain and austerity are a good thing to teach people how to stay in line, and too many members of Congress are committed to austerity/deficit-mongering here in the U.S. so there is unlikely to be much sentiment to take such action.
But, this is about politics and movement-building. It's a teachable moment.
Globalization apparently is fine when it means so-called "free trade" deals that lower standards of living across the globe but somehow it's not fine if the goal is raise, or protect, standards.
A place to make a stand, and to be bold.
11:08 AM PT: It really is astonishing how little some people understand about how the Fed operates, what a credit line is and on and on...[head hitting table]. I'll return to work now...in the real world.