Thursday, December 10, 2009

Federal Reserve Bank Window to Open for Non Banks?

Under House reform legislation, financial holding companies posing systemic risk would be allowed access to Federal Reserve funds. The Fed discount window is normally restricted to banks. The bill could provide crisis capital to insurance companies, hedge funds, private equity underwriters (PEU's), sovereign wealth funds, virtually any pool of private capital regulators believe threatens the system.

The Carlyle Group's Boston Private Financial Holdings received $153 million in TARP funds from Hank Paulson. Next time, they could secretly go to the Fed. Carlyle co-founder David Rubenstein hosted Fed Chief Ben Bernanke earlier this week at the Economic Club of Washington.

It's absolutely bizarre that Congress is re-erecting their financial house of cards and putting insurance on it. Uncle Sam will have the ability to backstop anybody. They frequently choose to benefit their friends. I expect that trend to continue. Lucky Mr. Rubenstein.

(From EconomicPolicyJournal & ClusterStock)