Hey, do you guys remember that time our government came together in an effort to perform the biggest corporate welfare handout in our government's history? It happened about five years ago when we authorized three-quarters of a trillion dollars to prop up banks?
Well, five years out, we still don't know a whole lot about the decision-making processes by the Federal Reserve and the federal government during the bailout period, but we may gain some insight thanks to Judge Thomas Wheeler deposing Fed Chairman Ben Bernanke for a lawsuit involving AIG's former CEO Hank Greenberg and the federal government. While this lawsuit may seem greedy and selfish, it's an important step in understanding more about the Troubled Assest Relief Program (TARP) and why the law was carried out the way it was.
Now, Greenberg is suing the federal government after it gave his former company $182 billion ($82 billion more than Dr. Evil requested) because he believes the terms of the bailout were too onerous, and that the federal government took valuable assets from AIG's stockholders without consent or fair compensation. Greenberg is suing the government with his company Starr International, which was the largest stockholder in AIG. AIG briefly flirted with the idea of joining in the lawsuit but decided against it following public backlash, and then attempted to bar Greenberg from suing on their behalf. Greenberg is seeking at least $25 billion.
Now let's step aside from the fact that $25 billion would put federal money to some sort of AIG saga at over twice the amount of money that renowned super villain Dr. Evil requested for the entire planet in Austin Powers: International Man of Mystery. The Federal Reserve operates at a level of secrecy that would startle Nicole Kidman and the society depicted in Eyes Wide Shut.This could be an unparalleled view within the dealings of the Fed at a time when it exerted the most power.
Bernanke would have to give direct answers under oath about the inner workings of the TARP program. Did the government seize assets from AIG without proper notice or compensation? Who drafted the "onerous" terms of the bailout package and who decided how much stock to purchase in AIG (the government controlled 80% after the TARP program). Did orders come from the White House? Secretary of Treasury Henry ? Which orders came from Bernanke himself? How much autonomy did the New York Federal Reserve bank have? The lack of transparency in the Federal Reserve system, and in the legislative branch when bills are passed this quickly without regard to consequences allow these questions to be asked.
Judge Wheeler has ensured us that we will get to know more about the controversial program that sent untold sums of money to financial institutions in a corporate welfare bailout. Ben Bernanke cannot continue to hide and the Federal Reserve cannot continue to operate in a shroud of secrecy. This lawsuit has the potential to answer a few of the questions listed above along with leaving several new ones in it's wake. The important part of this lawsuit is the Bernanke testimony where we will continue working toward a more transparent Federal Reserve.