Federal Reserve audit highlights possible conflicts of interest

[alp227]

Source: The Washington Post

When the Federal Reserve launched an unprecedented series of interventions in the financial system in 2008, it often moved so quickly that the usual practices for preventing conflicts of interest couldn’t keep up, according to a new report.

An audit of the Fed’s emergency lending programs by the Government Accountability Office, ordered by the financial reform law passed last year and released Thursday, reports generally sound financial management by the central bank as it undertook programs that deployed trillions of dollars to backstop a faltering financial system. But it brings to light difficult issues that arose when the Fed undertook actions that its rules never envisioned.

For instance, William C. Dudley, the president of the Federal Reserve Bank of New York who was a senior official there in 2008, owned stock of American International Group before the Fed bailed out the giant insurance firm. The GAO report did not mention him by name, but Sen. Bernie Sanders (I-Vt.), who spearheaded the audit, identified Dudley as the unnamed official described in the report.

Lawyers at the New York Fed allowed Dudley to continue owning the shares while working on issues relating to the bailout. They concluded that for him to sell the shares immediately after the central bank bailed out the firm would be more ethically problematic than simply holding onto them and selling at a later date.

Read more: http://www.washingtonpost.com/business/economy/federal-reserve-audit-highlights-possible-conflicts-of-interest/2011/07/21/gIQAJbbnSI_story.html

[girl gone mad]

1. k & r

[krabigirl]

2. K&R

[truedelphi]

3. Said it before, and will say it again -

if Tim Geithner, who headed the New York Fed at that time while the various maneuvers were being arranged, such that Goldman Sachs and AIG got so very much money, if he was a non-official doing that, he would be liable under RICO statutes.

And those who state that these trillions of dollars of funds have been paid back do not understand (or are out right lying) since the Big Financial Institutions did not use dollars as paybacks, but worthless bits of collateral based on CDO's and other tooty fruity derivatives.