Bloomberg report questions Fed role in 2008 crisis

In an explosive expose of the bonhomie between the US Federal Reserve and US banks, Bloomberg has laid bare what it said the Fed had held back from the public in 2008.

Bloomberg said its report is based on 29,000 pages of Federal Reserve documents that it fought hard for years to get its hands on through a right to information action.

In its January issue, Bloomberg Markets reports that the Fed did not tell anyone that a number of banks  were in such deep trouble they needed a combined $1.2 trillion on 5 December, 2008, their single neediest day. The Fed failed to mention that the banks took tens of billions of dollars in emergency loans at the same time they were assuring investors their finances were healthy.

The report said that the banks made an estimated $13-billion income thanks to the Fed's below-market rates. Thanks to the Fed's largesse, the banks were able to fend off some real tough regulation, such as a new Glass-Steagall Act.

Further, while Fed officials maintain that almost all the loans had been repaid and there were no losses, details point out that taxpayers paid a larger price beyond dollars as the secret funding helped preserve a broken status quo and facilitated the biggest banks to grow even bigger.

According to Bloomberg, the price extracted from the taxpayers has also been the worst the economy seen since the Depression, due to the dangerous business practices of the big banks and Wall Street.