Fed Snubs Any Public Review In Making Goldman and
Morgan Bank Holding Companies
Byline: Matthew Russell Lee of
Inner City Press in DC: News Analysis
September 22 -- The Federal Reserve
has become so lawless that its moves are hardly reported or questioned
On Sunday night the Fed by press release announced that it had approved
applications by Goldman Sachs and Morgan Stanley, all the better to
money to them. But to become a bank holding company is no small thing:
requires an application subject to public review, a public comment
ability to protest including on Community Reinvestment Act grounds.
As it did
in March when it allowed JPMorgan Chase to buy Bear Stearns without any
comment period (click here
for Inner City Press' story at the time) the Fed simply did this. But its
September 21 Goldman and Morgan press release does not
even cite any statute or regulation under
which it is waiving otherwise applicable law.
the Gramm Leach Bliley Act which repealed the Depression-era Glass
prohibition on mixing commercial and investment banking, the Fed could
made Goldman or Morgan into bank holding companies. When the
repealed, it was said that applications would be considered on a case
basis, with full public review. Now the Fed allows the biggest
to step over the line, with no public comment.
Fed's Ben Bernanke: here take the money, laws to be
The Fed is designing and
promoting a $700
billion bailout, extended over the weekend to include non-U.S.
financial institutions such as HSBC, Deutsche
Bank, Barclays, Royal Bank of Scotland, Credit Suisse, Nomura and
even Sovereign Wealth Funds.
the Fed simply says it is putting $85
billion into AIG, in exchange for a 79%
equity stake. Such a stake, including by a foreign government,
would require an
application to approval, subject to public comment.
But the Fed has said nothing about that, nor
about who will examine AIG's subprime lenders while they are controlled
government or Fed. Can you say, conflict
the Fed discuss this with Henry Paulson, formerly the chief of Goldman
Sachs? When will he finally start recusing himself?
Footnote: the only pro-public
aspect of Sunday's announcement is that with Morgan Stanley being a
BHC, if Wachovia or another buys it, they would unless waived have to
apply to the Fed, subject to the CRA. Then again, the Fed has shown
that the law means nothing to it.
Watch this site, and this debate, mostly
about UN but also Sarah Palin.
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