In the run-up to the financial crisis, the Federal Reserve fueled the housing bubble with its easy money policy. Now, we know that after the crisis struck, the Fed secretly propped up elite bankers all the way from Wall Street to Brussels to the Central Bank of Libya.
The Treasury Department was pumping $700 billion into banks under the Troubled Asset Relief Program, the Fed was covertly operating its own bailout program — the biggest in American history. The Fed's Shadow TARP issued $1.2 trillion in loans to domestic and foreign banks from 2007 to 2010, far more than Congress authorized Treasury to spend under TARP.
Left to its own devices, the Fed would have never revealed its secret bailout. Fed Chairman Ben Bernanke said in an April 2009 speech that disclosing the names of the borrowers "might lead market participants to infer weakness." To obtain the names, Bloomberg LP, the parent company of Bloomberg News, waged a two-year legal battle that was ultimately won in the U.S. Supreme Court.
While the Fed was fighting Bloomberg's Freedom of Information Act requests, it was also opposing attempts by Congress to audit the central bank for the first time in its 98-year history. Bernanke, who only has his position because Congress delegated its power to coin money to the Fed, testified the audit would "effectively be a takeover of policy by the Congress."
Congress eventually approved a partial audit that showed the Fed extended an incredible $16 trillion — more than the entire U.S. economy — in aggregate lending authority to foreign and domestic banks from the end of 2007 to the middle of 2010. Still, no one knows how or why those decisions were made.