for the Central Bank of South Korea so that it had enough money to bail out its own banks.
At a time when small businesses in Vermont and all over this country cannot get the loans they need to expand their businesses, I think the American people would find it extremely—I don't know what the word is—maybe amusing that the Fed bailed out the state-owned Bank of Bavaria—not Pennsylvania, not California, but Bavaria—by purchasing over $2.2 billion of its commercial paper.
Furthermore, when we cannot get support on the floor of this Senate to extend unemployment benefits to millions of Americans who are on the verge of seeing them expire, I think the American people would find it incomprehensible that the Fed chose to bail out the Arab Banking Corporation based in Bahrain by providing them with over $23 billion in loans with an interest rate as low as one-quarter of 1 percent. So small businessmen all over America: Maybe you have to run to Bahrain and work with the Arab Banking Corporation there to get some pretty good loans. But it would be nice if maybe the Fed would start to pay attention to banks in this country.
Furthermore, the Fed extended over $9.6 billion to the Central Bank of Mexico.
What is interesting about all of this is that we had a very vigorous debate here in the Senate and in the House over the $700 billion TARP program. Every person in America could turn on C-SPAN and hear that debate. They could hear what President Bush had to say, hear what then-Senator Obama and Senator McCain had to say. It was all pretty public. But what took place at the Fed, which, in fact, amounted to a larger bailout, was done behind closed doors. Over $3 trillion was lent with zero transparency. In fact, as a result of this recent disclosure—this is the first time we have gotten a glimpse of the magnitude and the particulars, the specificities of where that money was lent, and I think this is not a good thing for this country. Again, I voted against the bailout of Wall Street, but the debate was open and public. People wrote to their Senators and called their Senators. That is called democracy. After the TARP bailout took place, all of the loans were put up on the Web site. Transparency—the American people knew who got the money. But the actions of the Fed were done behind closed doors, and, in my view—it is an issue we are studying right now—I think there were significant conflicts of interest. I think we had people sitting there at the New York Fed who were beneficiaries of this bailout, and that is an issue we need to explore. I should tell my colleagues that as part of the provision we got into the financial reform bill, the GAO is, in fact, doing just that—investigating possible conflicts of interest at the Fed with regard to this bailout.
I think the question the American people are asking as they read about what the Fed did during the financial crisis is whether the Fed has now become the central bank of the world without any debate on the floor of the Senate or the Congress and without the knowledge of the American people. I think that is wrong. So I hope, out of this effort in bringing disclosure and transparency to the Fed, that one of the things that will come will be more transparency at the Fed.
As I indicated a moment ago, the Fed said this bailout was necessary in order to prevent the world economy from going over a cliff. But 3 years after the start of the recession, millions of Americans remain unemployed and have lost their homes, their life savings, and their ability to send their kids to college. Meanwhile, huge banks and large corporations have returned to making incredible profits and paying their executives recordbreaking compensation packages, as if the financial crisis they started never occurred.
What this recent disclosure tells us, among many other things, is that despite this huge taxpayer bailout, the Fed did not make the appropriate demands on these financial institutions which would have been necessary to rebuild our economy and protect the needs of ordinary Americans. In other words, what they simply did was give out billions and billions of dollars which were used in the self-interests of these financial institutions rather than saying: The American people who are hurting are bailing you out, and now that they have bailed you out, your responsibility is to do what you can to create jobs and to improve the standard of living of the people, many of whose lives you have severely impacted.
Let me give a few examples of what could have been done and what should be done. At a time when big banks have nearly $1 trillion in excess reserves parked at the Fed, the Fed has not required these institutions to increase lending to small and medium-sized businesses as a condition of the bailout. In other words, instead of the Fed just giving money to these financial institutions, the Fed should have said: We are giving you this money in order to get it into the economy. Start providing affordable loans to small businesses.
At a time when large corporations are more profitable than ever, the Fed did not demand that corporations that received this backdoor bailout create jobs and expand the economy once they returned to profitability. So what is going on in America? Unemployment is officially at 9.8 percent and in a real sense probably at 15 or 16 percent, but Wall Street is now doing fine.
A few years ago, Wall Street earned some 40 percent of all profits in America, and they are doing great. But what the Fed should have done and should do now is to tell Wall Street: You are part of the economy. You are not an isolated area just living for yourselves. You have to be a part of the productive economy. You have to lend money to small businesses to start creating jobs.
My office intends to investigate whether these secret Fed loans, in some cases, turned out to be direct corporate welfare to big banks that may have used those loans not to reinvest in the economy but, rather, to lend back to the Federal Government at a higher rate of interest by purchasing Treasury securities. Now, we don't know that. Maybe that is true, maybe it is not true, but we will take a look at it. In other words, did the Fed give one-half of 1 percent loans to a bank and that bank then purchased a Treasury security at 2 or 3 percent? If so, you have a 2-percent profit margin, and that is nothing but corporate welfare. The goal of the bailout was not to make Wall Street richer; the goal was to expand our economy and put people to work.
Furthermore, we know that as part of the TARP agreement, there was an effort to say to the financial institutions: We are not bailing you out in order for you to get huge compensation packages. We are not going to give you Federal money so you can make all kinds of money. We put limitations on executive compensation.
Did the Fed play the role of allowing some of the large financial institutions to pay back the TARP money, use the Fed money, and then continue with their very high executive compensation? We don't know, but it is worth investigating.
Furthermore—and this is an issue I have worked on for a number of years. We know every major religion on Earth—Christianity, Judaism, Islam, you name it—has always felt that usury is immoral. What we mean by usury is that when someone doesn't have a lot of money and you loan them money, you don't get blood out of a stone. You can't ask for outrageously high interest rates when somebody is hurting. That is immoral. Every major religion, all great philosophers have written about this. Yet today we have millions of people in our country—and I hear from Vermonters every week on this issue—who are paying 25 percent or 30 percent and in some cases even higher interest rates on their credit cards—20 percent, 30 percent interest rates. That is getting blood out of a stone. Yet many of the credit card companies were bailed out by the taxpayers of this country. What the Fed must do is say to those companies: Sorry, you can't continue to rip off the American people and charge them 25 percent or 30 percent interest rates.
As it happens, the four largest banks in this country, which are Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup, issue half of all mortgages in this country. Four huge financial institutions issue half of all mortgages in this country. That unto itself is a huge problem. They issue half of all mortgages, two-thirds of all credit cards. That speaks to another issue about the need to start bringing
