Burgess COMMENTARY

Peter Burgess

Alan Grayson: 'Which Foreigners Got the Fed's $500,000,000,000?' Bernanke: 'I Don't Know.'

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0:00general partner thank you mister chairman 0:04chairman rock and looking at the report that you handed out this morning 0:09and as one if you could take your copy and turned 8:26 0:17K others a table on page 26 0:21which consists of your balance sheet and one of the entries on the balance sheet 0:25his 0:26under assets central bank liquidity swaps 0:29which shows an increase from the end of 2007 0:34from $24 billion dollars to 0:37$553 billion dollars in change 0:40at the end of 2008 what's that 0:43those are swaps that we're done with foreign central banks 0:47many on many foreign banks 0:51are short dollars and come into our markets looking for dollars and drive 0:55interest rates increased volatility in our markets 0:57but we've done is with the number major central banks 1:01European Central Bank resemble we swap our currency dollars 1:05their currency euros they take the dollars lead out to banks and their 1:09in there jurisdiction that helps bring down interest rates 1:13in the global market for dollars and meanwhile we're not many to those banks 1:17for lending to the central bank said the bank is responsible for repaying us 1:21so that the money to 1:24financial institutions in in Europe in other countries which ones 1:28I don't know half-a-trillion dollars and you know who got the money 1:33out the loan went to the the loans go to the central bank's name 1:36the then put them out there I'm to their institutions to try to bring down 1:41short term interest rates and other markets around the world well let's 1:44start with which central banks from the money 1:46their 40 know them which are listed %um in our 1:50I'm sure the listed in here somewhere alright so 1:54who actually made that decision to hand out a trillion dollars that way 1:57half-a-trillion dollars who made that decision the federal market committee 2:01okay and was it done at one time or in a series to be the series meetings 2:06and under what legal authority we have a long-standing the authority to do swaps 2:12with the central bank's 2:13you hands-on emergence non-emergency a thirty minute I'm 2:16anything specific about it on 2:19you know them my councils the section 14 jump the Fed Reserve Act 2:26part with we actually look at one of the arrangements 2:29and one arrangements is nine billion dollars for New Zealand that works out 2:33the three thousand dollars for every single person who was museum 2:37seriously would have been better to extend that kinda credit to americans 2:41throw the New Zealanders 2:42it's not costing Americans anything we're getting interest back in comes 2:47back 2:48it's not at the costume any American credit garstin credit to americans 2:52well can wouldn't necessarilly 2:56affect the credit markets have used and a half trillion dollars in 2:59and credit anybody we are living to all 3:02US a financial institutions exactly the same way well look at the next page the 3:06very next page has the US dollar 3:08number exchange rate which shows a 20 percent increase in US dollar nom 3:12exchange rate at exactly the same time 3:14but you're handing out half a trillion dollars to partners giving it a 3:18coincidence 3:19yes I 3:23alright well the Constitution 3:26says no money shall be drawn from the Treasury but in consequence 3:30appropriations made by one 3:32de-mining I Drive the Treasury well let's talk about but I'm 3:36do you think it's consistent with the spirit that British in the constitution 3:40for 3:40a group like the from OC to hand out half-a-trillion dollars to foreigners 3:45without any action by this congress congress approved in the Fed Reserve Act 3:51when was that quite a long time ago I don't know exact date 3:56I can hear you know be reelected 1914 I believe 4:00I don't know what this provision in 1914 or not but the Fed Reserve Act of 1913 4:06all right at that time the entire gross national product this country's well 4:10under half a trillion dollars was gonna 4:12I don't know and safe to say that nobody in 1913 contemplated that for small 4:17group of people would decide 4:19and a half a trillion dollars to farms just 4:24the serb this particular authorities been used I'm numerous times over the 4:28years 4:28well actually according to sure 4:32on page 2008 on 4:35being virtually the entire amount that's reflected in your current balance sheet 4:39one out starting in the last quarter of 2007 4:43and before that going back to the beginning I'm 4:47love this juror the amount of mining 10 to foreigners 4:51is that it was there where the crisis you have this was was the party the 4:54crosses 4:55he was central banks to I'm began to try to 4:59get dollar money markets working normally in the global 5:03economy alright my time is very limited began more than me but I don't 5:07conduct prior young man New York German at thank you very much mister

Uploaded on Jul 21, 2009

This is Congressman Alan Grayson questioning Federal Reserve Chairman Ben Bernanke on $550B of loans to foreigners (or 'central liquidity swaps' in Federal Reserve-ese').

Which financial institutions received this money? Bernanke's answer: I don't know.

As the Fed was lending this money, the dollar increased by 30% in value. Grayson asks, was this a coincidence? Bernanke's answer: yes.