Just when you thought our representatives in Washington had woken up and were ready to fix their outrageous "too big to fail" bailout policy, they sneak in some fine print in their "reform" package that will give government even more bailout power, as William Greider explains in The Nation.
The sale pitch for financial-reform legislation pending in the House claims it would put a stop to "too big to fail" bailouts for the leading banks. The reality is the opposite. The federal government would instead be granted unlimited authority to spend whatever it takes to prop up the big boys when they get in trouble. Only in the next crisis, Congress won't have to be asked for the money. The financial rescues will be funded by the secretive Federal Reserve, not the Treasury, with money the Fed itself creates.
And the emergency lending could be pumped into any financial institution in trouble--not just behemoth commercial banks but investment houses like Goldman Sachs, insurance companies, hedge funds or any other pools of private capital whose failure regulators believe would threaten the system.
This sounds nutty and it is. A permanent security blanket for big boys of finance will further inflame public opinion. Only the public isn't likely to know. The crucial terms for Fed financing are set by an innocuous-sounding amendment offered by Representative Brad Miller of North Carolina. Any financial holding company designated as a "systemic risk" and subject to stricter regulatory standards "shall have the same access to the discount window lending of an appropriate Federal Reserve Bank as is available to a member bank of each Federal Reserve bank."
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