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Bernanke Claims Fed Not to Control AIG, Justifies
Morgan and Goldman Exclusion of Public, CRA
Byline: Matthew Russell Lee of
Inner City Press in DC: News Analysis
WASHINGTON DC,
September 22 -- "We don't own
AIG or have authority over its subsidiaries," Federal Reserve
chairman Ben
Bernanke said Monday at the Fed's Washington headquarters. Inner City
Press
asked him if it is correct that any other entity which wanted warrants
for 79%
of the stock of AIG would have to apply for approval, with a public
comment
period subject to the Community Reinvestment Act.
Bernanke shrugged and said
that CRA should be consider all the time, not necessarily on mergers
and
acquisitions. But that's when the CRA statute says it must be considered, Inner
City Press pointed out, as CRA's only enforcement mechanism. "I don't think that rule makes a lot of
sense," Bernanke said. But it's not a rule, but the law, as formally
interpreted in 1994 by then U.S. Solicitor General Walter Dellinger.
Click here
for the government memo.
To the
Federal Reserve at present, it appears, the law is just a hindrance and
"not very effective," as Bernanke put it on Monday. Inner City Press
asked under what authority the Fed had made Goldman
Sachs and Morgan Stanley
into bank holding companies on Sunday night, without any public notice
or
comment, including under CRA. We have emergency powers, Bernanke
replied,
though none were cited in the Fed's
Sunday night press release.
It was
later pointed out to Inner City Press that the Fed's legal staff
finished a
formal approval order at 2 a.m. on Monday, and put
it online later in the
morning. The order relies on, for example, Goldman Sachs'
industrial loan company's "satisfactory" CRA rating, a grade attained
by 98% of institutions, and which did not consider Goldman's and Morgan
Stanley's engagements including as securitizers and orginators in
questionable subprime lending.
It was also explained to Inner City Press by Fed legal
staff that even
the five day waiting period mentioned in Sunday's press release was
dispensed
with. As to the Fed
controlling AIG, the advice was that Fair
Finance Watch
should raise it to the Office of Thrift Supervision. We will.
Bernanke
spoke of growing up in South Carolina, working as a waiter and in
construction,
and that his wife is a school teacher. They are not divorced from the concerns
of everyday Americans. I don't know people on Wall Street, Bernanke
said.
Perhaps seven words are worth more than one thousand pictures.
Bernanke's Fed: a building, five governors, public
notice and comment not shown
Governor
Kroszner, also there, spoke of visiting such cities as Las Vegas and
Cincinnati, to see the impacts of the foreclosure crisis.
Elizabeth Duke, the newest Governor, has been
put in charge of homeowners' issues. Vice Chairman Kohn was present but
stayed
silent. Governor Mishkin, absent in March when Bear Stearns got an
emergency
bailout, has since left the the Board (he resigned
on August 31). Governor Walsh did not appear to be
present.
Bernanke said he will testify Tuesday on
Capitol Hill at the hearings on the proposed
$700 billion bailout bill, about how Balkanized bank regulation has
been to date. You'll see
a different landscape in a year, he said. Since public notice and
comment is
being dispensed with, and Bernanke thinks that the CRA law requiring
consideration of performance in low and moderate income neighborhoods
in
connection with mergers is "ineffective," the request seems to be
just to trust him. Many communities do not. But what recourse do they
have?
Watch this site, and this Sept. 18 (UN) debate.
* * *
These
reports are
usually also available through Google
News and on Lexis-Nexis.
Click
here
for a Reuters
AlertNet piece by this correspondent
about Uganda's Lord's Resistance Army. Click
here
for an earlier Reuters AlertNet piece about the Somali
National
Reconciliation Congress, and the UN's $200,000 contribution from an
undefined trust fund. Video
Analysis here
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