Banks came out big winners of Fed bailout while Congress and citizens were kept in the dark about their money

In 2010, former Secretary of the Treasury Henry Paulson suggested that without the bailout unemployment would reach unacceptable levels of 8 to 9%. It currently sits at 9%.

Bloomberg has released details of the Fed’s bailout of major banking institutions during the financial cirsis of 2008, and the results are astounding. $1.2 trillion was doled out to those deemed “too big to fail,” with Bank of America and Citigroup making $1.5 billion and $1.8 billion respectively off money loaned to them by the Fed.

This information was withheld from not only members of the press but members of Congress themselves, including those who sat on committees approving and extending TARP and similar regulations that ensured banking institutions wouldn’t implode due to their own excess and irresponsible – some would say criminally negligent – mortgage and lending practices.

I’m not comfortable with the suggestion that the bailout should not have happened, given the circumstances. One damning quote repeated in this article and circulated throughout the last several months comes from Henry Paulson, the former Secretary of the Treasury. In his 2010 book On the Brink, he gave the projection that without the 2008 Fed bailout and TARP, employment would spike from its acceptable level of 6.1% all the way to the outrageous levels of 8 or 9%…which is exactly where we now find ourselves.

So does this mean the bailout was unnecessary and that these banks should have been allowed to fail, or that things would have been even worse if nothing was done? Anyone who claims to conclusively give you an answer either way is, at best, deluded.

One thing, though, does seem certain to me and many others: these banks were and are too goddamn big. Particularly Bank of America, which not only took some of the largest chunks of the bailout and reaped the largest rewards, but also boldface lied to its investors before, during, and after the bailouts by insisting they were in good shape and failing to disclose their dependency on taxpayer dollars to keep from collapse.

Regulation and breaking up the banks would have been the only solution. Go ahead and call me a Socialist if it’ll make you feel better.

In the fall of 2009, the Financial Services Forum – essentially the CEOs of every major financial institution – told Congress that any attempt to break up banks would doom the United States economy, make us inferior globally, and cost an untold number of jobs. Bigger banks were better, they argued, because it meant they were more stable and reliable. They backed up their claims with research from a Nobel winning economist, Oliver E. Williamson, who when contacted by Bloomberg was quick to note that the firm knowingly distorted and misrepresented his findings.

So here we are. It’s 2011. The Fed failed us, Congress failed to turn on its bullshit detector, and the Obama administration kept marching to the same beat pounded during the previous two administrations and stood in firm opposition to even the faintest suggestion of regulation. Things could be so much worse, but they are also in many ways as bad as we were told they would be had the bailout not happened. And regardless of where you stand on the issue of should we have or shouldn’t we have, the real issue is that nothing of substance has changed to prevent this from happening again.