The Fed just loaned financial institutions a trillion dollars or so. And recently some of these institutions – eg. J.P. Morgan, Goldman Sachs – began repaying a few tens of billions. Indeed, these banks were magically reporting massive profits. How did they do that? I was listening intently yesterday to an NPR commentary on how these banks managed to turn around their business in such short order, while the rest of the world economy was still in the toilet. One point the commenter made is the source of my burning question tonight. The commenter said that a significant source of new funds for these banks was the transaction fees they received for putting together the trillion dollars that the Fed "advanced" to the American government. Is this true? Did J.P. Morgan and Goldman Sachs actually make money off the trillion dollars that the Fed gave the Treasury?
Now at first this seems preposterous until we recall that major banks like J.P. Morgan are actually the principal OWNERS of the Federal Reserve Bank. J.P. Morgan’s CEO Jamie Dimon sits on the board of governors of the New York branch of the Fed—the very branch which last year guaranteed $29 billion in assets to enable J.P. Morgan to acquire Bear Stearns at a fire sale price. (Not a single major media reported this apparent blatant conflict of interest at the time.) If you look at the history of the Federal Reserve Bank, you see that it was originally the brainchild of J.P. Morgan himself, and that when the bank was first set up it in 1913 it was in fact wholly owned by private banks. Over the years the Fed has acquired a patina of public control, but despite presidential appointments to the board and a smattering of congressional oversight, the private banks remain firmly in control and effectively beyond the reach even of a public audit.
But what I’m trying to get at in this post is to find out if there is anyone among the genius pool at DailyKos who can share the key information I am requesting, which is whether the biggest banks such as J.P. Morgan and Goldman Sachs who to the best of my knowledge still own major shares in the Federal Reserve Bank actually profited from these recent huge printing-press transactions where the Fed turned over a trillion bucks in fresh money to the U.S. government.
Why would this be interesting? I think it would be interesting because it might prove to be a key that could unlock public understanding of the Fed. After all, the mysteries of Jekyll Island, the origins of the Fed and fiat money may be hard to grasp, but the idea that private bankers actually made money by printing money that they gave to the government to then bail themselves out – that’s something I think the public could understand. If it’s true. But is it true? What is real, when it comes to the Fed? Does anyone out there really know?