Federal Reserve Tim Evanson

Photo by Tim Evanson.

PBI Chair Ellen Brown writes in a recent article that, once again, banks have been saved from bankruptcy by the unilateral decisions of unelected Federal Reserve bureaucrats. Private banking has been made effectively risk-free, backed by the full faith and credit of the United States and its people; but the banks are not sharing the benefits with the people. Banking needs to be made a public utility. Ellen explains how the crisis actually began in September 2019 in the repo market:

“Rather than letting the banks fail and forcing a bail-in of private creditors’ funds, the Fed quietly stepped in and saved the banks by becoming the ‘repo lender of last resort.’ But the liquidity crunch did not abate, and by March the Fed was making $1 trillion per day available in overnight loans. The central bank was backstopping the whole repo market, including the hedge funds, an untenable situation. In March 2020, under cover of a national crisis, the Fed therefore flung the doors open to its discount window, where only banks could borrow. …

“The Fed’s scheme worked, and demand for repo loans plummeted. But unlike in Canada, where big banks slashed their credit card interest rates to help relieve borrowers during the COVID-19 crisis, US banks did not share this windfall with the public. Canadian interest rates were cut by half, from 21% to 11%; but US credit card rates dropped in April only by half a percentage point, to 20.15%.”

[Read the full article]