Bernanke Claims Fed Not to Control AIG, Justifies
Morgan and Goldman Exclusion of Public, CRA
Byline: Matthew Russell Lee of
Inner City Press in DC: News Analysis
September 22 -- "We don't own
AIG or have authority over its subsidiaries," Federal Reserve
Bernanke said Monday at the Fed's Washington headquarters. Inner City
asked him if it is correct that any other entity which wanted warrants
of the stock of AIG would have to apply for approval, with a public
period subject to the Community Reinvestment Act.
Bernanke shrugged and said
that CRA should be consider all the time, not necessarily on mergers
acquisitions. But that's when the CRA statute says it must be considered, Inner
City Press pointed out, as CRA's only enforcement mechanism. "I don't think that rule makes a lot of
sense," Bernanke said. But it's not a rule, but the law, as formally
interpreted in 1994 by then U.S. Solicitor General Walter Dellinger.
for the government memo.
Federal Reserve at present, it appears, the law is just a hindrance and
"not very effective," as Bernanke put it on Monday. Inner City Press
asked under what authority the Fed had made Goldman
Sachs and Morgan Stanley
into bank holding companies on Sunday night, without any public notice
comment, including under CRA. We have emergency powers, Bernanke
though none were cited in the Fed's
Sunday night press release.
later pointed out to Inner City Press that the Fed's legal staff
formal approval order at 2 a.m. on Monday, and put
it online later in the
morning. The order relies on, for example, Goldman Sachs'
industrial loan company's "satisfactory" CRA rating, a grade attained
by 98% of institutions, and which did not consider Goldman's and Morgan
Stanley's engagements including as securitizers and orginators in
questionable subprime lending.
It was also explained to Inner City Press by Fed legal
staff that even
the five day waiting period mentioned in Sunday's press release was
with. As to the Fed
controlling AIG, the advice was that Fair
should raise it to the Office of Thrift Supervision. We will.
spoke of growing up in South Carolina, working as a waiter and in
and that his wife is a school teacher. They are not divorced from the concerns
of everyday Americans. I don't know people on Wall Street, Bernanke
Perhaps seven words are worth more than one thousand pictures.
Bernanke's Fed: a building, five governors, public
notice and comment not shown
Kroszner, also there, spoke of visiting such cities as Las Vegas and
Cincinnati, to see the impacts of the foreclosure crisis.
Elizabeth Duke, the newest Governor, has been
put in charge of homeowners' issues. Vice Chairman Kohn was present but
silent. Governor Mishkin, absent in March when Bear Stearns got an
bailout, has since left the the Board (he resigned
on August 31). Governor Walsh did not appear to be
Bernanke said he will testify Tuesday on
Capitol Hill at the hearings on the proposed
$700 billion bailout bill, about how Balkanized bank regulation has
been to date. You'll see
a different landscape in a year, he said. Since public notice and
being dispensed with, and Bernanke thinks that the CRA law requiring
consideration of performance in low and moderate income neighborhoods
connection with mergers is "ineffective," the request seems to be
just to trust him. Many communities do not. But what recourse do they
Watch this site, and this Sept. 18 (UN) debate.
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