Bloomberg has obtained documents under the Freedom of Information Act that show guys like the Bank of America executive lying through their teeth. The banks were telling customers and investors that they were sound and solvent and doing just fine while they were, collectively, desperately borrowing trillions to cling to life. And, you guessed it, the execs kept their bonuses coming with those dollars.
The Federal Reserve is supposed to help provide liquidity in distressed financial markets. I get that. But these documents show that the Fed was picking winners and losers as they made their loans. They kept some firms solvent just long enough to complete buyouts – Wachovia and Bear Stearns were two such Fed-sustained comatose corporations. The Fed and the banks kept the loans a secret during the crisis and only released their information under a FOIA request.
The question is if these revelations will result in real regulation for the branch of organized crime we euphemistically refer to as “the banking industry.” Given the fact that the banks still have loads of cash to pay armies of lobbyists and you don’t, I’m not very optimistic about this leading to changes.