GAO to audit Federal Reserve's Role in AIG Bail Out - Thanks Congress!

You might remember this post:

Senator Chuck Grassley (R-IA) submitted an amendment (amending Section 714 of the United States Code) that would have given significant auditing authority to Comptroller General/Government Accountability Office (GAO) over the Board of Governors of the Federal Reserve System.

Which managed to slip past the lobbyists and God knows who else in the Helping Families Save Their Homes Act of 2009, which was just signed into law.

Now Bloomberg reports Fed’s Role in AIG May Be First Target of GAO Audit:

Congressional auditors may soon examine the Federal Reserve’s role in the U.S. bailout of American International Group Inc. after gaining authority to review Fed documents under a law that took force last week, Acting U.S. Comptroller General Gene Dodaro said.

“We’re in the process now of developing our future work plans and certainly we’ll use our authorities,” Dodaro, head of the Government Accountability Office, said in his first interview on the topic since President Barack Obama signed the Fed audit powers into law on May 20. “In terms of exercising the newest authority, AIG will be the first entity.”

Audits by the congressional watchdog are part of intensified scrutiny by lawmakers concerned about costs to taxpayers from the Fed’s unprecedented expansion of credit to nonbank financial firms. The central bank, seeking to revive lending and end the worst recession in half a century, has invoked emergency powers and doubled its assets the past year.

The GAO’s first report using the new powers may come within a few months, Dodaro said. “We can report any time we find something significant,” he said.

A few months? Hell, how about tomorrow GAO?

Yet, the New York Times reports the banks and lobbyists are scurrying like rats to avoid any scrutiny on derivatives:

Atop the agenda during their calls: how to counter an expected attempt to rein in credit-default swaps and other derivatives — the sophisticated and profitable financial instruments that were intended to limit risk but instead had helped take the economy to the brink of disaster.

The nine biggest participants in the derivatives market — including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America — created a lobbying organization, the CDS Dealers Consortium, on Nov. 13, a month after five of its members accepted federal bailout money.

To oversee the consortium’s push, lobbying records show, the banks hired a longtime Washington power broker who previously helped fend off derivatives regulation: Edward J. Rosen, a partner at the law firm Cleary Gottlieb Steen & Hamilton. A confidential memo Mr. Rosen drafted and shared with the Treasury Department and leaders on Capitol Hill has, politicians and market participants say, played a pivotal role in shaping the debate over derivatives regulation.

Anybody wondering how the same banks who received U.S. taxpayer money are now being allowed to control any regulatory reforms? Yeah, me too.

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The financial conglomerates won the last

battle over derivatives. But check this out from the NYT article:

Mr. Rosen’s confidential memo, dated Feb. 10 and obtained by The New York Times, recommended that the biggest participants in the derivatives market should continue to be overseen by the Federal Reserve Board. Critics say the Fed has been an overly friendly regulator, which is why big banks favor it.

This is evidence that giving any new regulatory authority to the Fed is a bad idea.

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I'm beginning to wonder

If perhaps the FED needs to be taken down a notch- to state level instead of federal.

In North Dakota, the BND already does many of the jobs any central reserve bank does- and does them well.
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Maximum jobs, not maximum profits.

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Maximum jobs, not maximum profits.