The Return of the TARP Lie About the Commercial Paper Market
|Monday, 25 October 2010 12:11|
In September of 2008 Federal Reserve Board Chairman Ben Bernanke deliberately misled Congress. He told them that they had to approve the $700 billion TARP bailout because the commercial paper markets were shutting down.
A shutdown of the commercial paper markets would genuinely have been disastrous for the economy since most major corporations are dependent on issuing commercial paper for meeting payroll and other ongoing expenses. If even healthy companies couldn't raise money through the commercial paper market then we would be looking at an economic collapse in fairly short order.
Bernanke was deceiving Congress with his discussion of the commercial paper market because he single handedly possessed the ability to support the commercial paper market. In fact, the weekend after Congress voted for the TARP he announced that he would create a special Fed lending facility to directly buy commercial paper from non-financial companies.
If Bernanke had been honest with Congress he could have told them of his plans to create such a facility before they voted on TARP and explained that the commercial paper market could be sustained whether or not they approved the TARP bailout.
This is worth mentioning now because this hoary lie keeps popping up. Let's be clear, it was important for the Fed/government to take steps to sustain a working financial system. But these steps could have included conditions that made Wall Street pay a huge price and change its mode of operation forever.
The decision to give the money essentially without conditions was a political decision that was attributable to the banks' political power. As a result, these parasites are more economically and politically powerful than ever. The public should know the truth even if they lack the money to do anything about it.