Athanasius
10-25-2011, 08:49 PM
so this is a reply i received in an argument against Cain and the FED. is this true about the partial audit? help me fact check this guy and respond...i was enjoying the argument but i have to go to work...
Let's look at the Fed and the whole argument that it was recently audited for the first time ever and uncovered that we had given away $15 trillion to foreign governments. Absolutely FALSE. Anyone who states that never took the time to go and read the audit and if they did were incapable of understanding the numbers in it.
First off, the Fed has been audited literally 100's of times. Each audit has focused on different parts at different times, but the Fed is one of the most widely audited government organizations in America. People who make out like it has gone rogue and is free from audit are just trying to get people riled up. Secondly, the GAO audit that you reference did not state that we "gave away" $15 trillion. There was a chain email/report going around claiming that (actually the number was closer to $16T) but it wasn't factual.
I looked into the GAO report myself because the facts just didn't add up when someone tried to tell me what you are in this post. That article that was being forwarded in chain emails grossly misrepresents the $16 trillion of lending that is cited in the GAO report and what that amount represents. The $16 trillion cited in the report is an aggregate amount of borrowing from the Fed. The following example of the term aggregate lending, as used in its report, comes directly from the GAO report on page 130 if you care to read it: "For example, an overnight PDCF loan of $10 billion that was renewed daily at the same level for 30 business days would result in an aggregate amount borrowed of $300 billion although the institution, in effect, borrowed only $10 billion over 30 days."
To look at it differently, if your mortagage of $100K was structured with a term of 1 day at 0% interest renewed daily for 30 years, as opposed to a conventional 30 year term, it could be said that your aggregate borrowing on a $100K loan was $1.1 billion. In fact, you only received $100K but you kept it for 30 years. It would not be accurate to say the bank lent you $1.1 billion for a house only worth $100K, but that is what the people regurgitating that we gave away $16 trillion are implying in order to get people riled up for their cause.
The article going around in emails leads you to believe that $16 trillion was covertly "given" out to banks and has not been returned. Reading the first paragraph of the GAO report clears up a lot of what is sensationalized in the article. The balance of any loans outstanding at any one point in time peaked at $1 trillion in late 2008 during the financial crisis. That means at no point in time was $16 trillion outstanding, it was $1 trillion outstanding at its peak in 2008. Virtually all of the money has been returned. As short term loans were made, most of which were overnight loans, others were repaid and essentially the same money was recycled and lent to a lot of recipients at different times for very short periods. Instead, virtually all of this money HAS BEEN returned and is not outstanding today.
In case you want to read the actual GAO report, here is the link from Bernie Sanders' website (btw, he also had no clue what aggregate lending meant):
http://sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf
The first paragraph of the GAO report is pasted below:
On numerous occasions in 2008 and 2009, the Federal Reserve Board invoked emergency authority under the Federal Reserve Act of 1913 to authorize new broad-based programs and financial assistance to individual institutions to stabilize financial markets. Loans outstanding for the emergency programs peaked at more than $1 trillion in late 2008. The Federal Reserve Board directed the Federal Reserve Bank of New York (FRBNY) to implement most of these emergency actions. In a few cases, the Federal Reserve Board authorized a Reserve Bank to lend to a limited liability corporation (LLC) to finance the purchase of assets from a single institution. In 2009 and 2010, FRBNY also executed large-scale purchases of agency mortgage-backed securities to support the housing market. The table below provides an overview of all emergency actions covered by this report. The Reserve Banks’ and LLCs’ financial statements, which include the emergency programs’ accounts and activities, and their related financial reporting internal controls, are audited annually by an independent auditing firm. These independent financial statement audits, as well as other audits and reviews conducted by the Federal Reserve Board, its Inspector General, and the Reserve Banks’ internal audit function, did not report any significant accounting or financial reporting internal control issues concerning the emergency programs.
Let's look at the Fed and the whole argument that it was recently audited for the first time ever and uncovered that we had given away $15 trillion to foreign governments. Absolutely FALSE. Anyone who states that never took the time to go and read the audit and if they did were incapable of understanding the numbers in it.
First off, the Fed has been audited literally 100's of times. Each audit has focused on different parts at different times, but the Fed is one of the most widely audited government organizations in America. People who make out like it has gone rogue and is free from audit are just trying to get people riled up. Secondly, the GAO audit that you reference did not state that we "gave away" $15 trillion. There was a chain email/report going around claiming that (actually the number was closer to $16T) but it wasn't factual.
I looked into the GAO report myself because the facts just didn't add up when someone tried to tell me what you are in this post. That article that was being forwarded in chain emails grossly misrepresents the $16 trillion of lending that is cited in the GAO report and what that amount represents. The $16 trillion cited in the report is an aggregate amount of borrowing from the Fed. The following example of the term aggregate lending, as used in its report, comes directly from the GAO report on page 130 if you care to read it: "For example, an overnight PDCF loan of $10 billion that was renewed daily at the same level for 30 business days would result in an aggregate amount borrowed of $300 billion although the institution, in effect, borrowed only $10 billion over 30 days."
To look at it differently, if your mortagage of $100K was structured with a term of 1 day at 0% interest renewed daily for 30 years, as opposed to a conventional 30 year term, it could be said that your aggregate borrowing on a $100K loan was $1.1 billion. In fact, you only received $100K but you kept it for 30 years. It would not be accurate to say the bank lent you $1.1 billion for a house only worth $100K, but that is what the people regurgitating that we gave away $16 trillion are implying in order to get people riled up for their cause.
The article going around in emails leads you to believe that $16 trillion was covertly "given" out to banks and has not been returned. Reading the first paragraph of the GAO report clears up a lot of what is sensationalized in the article. The balance of any loans outstanding at any one point in time peaked at $1 trillion in late 2008 during the financial crisis. That means at no point in time was $16 trillion outstanding, it was $1 trillion outstanding at its peak in 2008. Virtually all of the money has been returned. As short term loans were made, most of which were overnight loans, others were repaid and essentially the same money was recycled and lent to a lot of recipients at different times for very short periods. Instead, virtually all of this money HAS BEEN returned and is not outstanding today.
In case you want to read the actual GAO report, here is the link from Bernie Sanders' website (btw, he also had no clue what aggregate lending meant):
http://sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf
The first paragraph of the GAO report is pasted below:
On numerous occasions in 2008 and 2009, the Federal Reserve Board invoked emergency authority under the Federal Reserve Act of 1913 to authorize new broad-based programs and financial assistance to individual institutions to stabilize financial markets. Loans outstanding for the emergency programs peaked at more than $1 trillion in late 2008. The Federal Reserve Board directed the Federal Reserve Bank of New York (FRBNY) to implement most of these emergency actions. In a few cases, the Federal Reserve Board authorized a Reserve Bank to lend to a limited liability corporation (LLC) to finance the purchase of assets from a single institution. In 2009 and 2010, FRBNY also executed large-scale purchases of agency mortgage-backed securities to support the housing market. The table below provides an overview of all emergency actions covered by this report. The Reserve Banks’ and LLCs’ financial statements, which include the emergency programs’ accounts and activities, and their related financial reporting internal controls, are audited annually by an independent auditing firm. These independent financial statement audits, as well as other audits and reviews conducted by the Federal Reserve Board, its Inspector General, and the Reserve Banks’ internal audit function, did not report any significant accounting or financial reporting internal control issues concerning the emergency programs.