The Fed: "Giving already stinking rich people gobs of money for no fucking reason at all"

Because most U.S. federal government spending goes to defense, Social Security, Medicare, or Medicaid, Washington Post reporter Ezra Klein calls our government “an insurance company with an army.”

Our “insurance company” is running giant deficits. The obvious solution: raise taxes on the richest 1% of Americans — who have soaked up virtually all income gains over recent decades. Instead, Washington has given them massive tax cuts and is now focused on spending cuts. So far, the Tea Party has focused on the tiny percentage of government spending that constitutes most of what we think of as government — like foreign aid, the EPA, and national parks — but only a sliver of spending.

This is insanity because Congress writes laws that routinely let massive, hugely profitable firms — like GE — get off without paying any tax whatsoever. And, as this jaw-dropping Rolling Stone article explains, the Fed has literally been shoveling TRILLIONS of dollars at the richest of the rich and the least deserving Americans and non-Americans. The Fed handed out TENS OF TRILLIONS of dollars during the financial crisis. One relatively puny Fed loan, of $220 million, went to a firm established specifically to grab bailout money “by the wife of John Mack, the chairman of Morgan Stanley, [and] the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley’s investment-banking division.”

A few other revelations from this must-read article:

  • It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses.

  • During the financial crisis, the Fed routinely made billions of dollars in “emergency” loans to big banks at near-zero interest. Many of the banks then turned around and used the money to buy Treasury bonds at higher interest rates — essentially loaning the money back to the government at an inflated rate. “People talk about how these were loans that were paid back,” says a congressional aide who has studied the transactions. “But when the state is lending money at zero percent and the banks are turning around and lending that money back to the state at three percent, how is that different from just handing rich people money?” Those kinds of deals were the essence of the bailout — and the vast mountains of near-zero government cash turned companies facing bankruptcy into monstrous profit machines. In 2008 and 2009, while Christy Mack was busy getting her little TALF loans for $220 million, her husband’s bank hauled in $2 trillion in emergency Fed loans. During the same period, Goldman borrowed nearly $800 billion. Shortly afterward, the two banks reported a combined annual profit of $14.5 billion.

  • Muammar Qaddafi received more than 70 loans from the Federal Reserve

  • hundreds of millions of Fed dollars were given out to hedge funds and other investors with addresses in the Cayman Islands. Many of those addresses belong to companies with American affiliations — including prominent Wall Street names like Pimco, Blackstone and … Christy Mack. Yes, even Waterfall TALF Opportunity is an offshore company. It’s one thing for the federal government to look the other way when Wall Street hotshots evade U.S. taxes by registering their investment companies in the Cayman Islands. But subsidizing tax evasion? Giving it a federal bailout?

Posted by James on Wednesday, April 13, 2011