How did banks recover so quickly from the crash while small businesses did not?
Banks borrowed money from the Federal Reserve Bank for next to nothing and then loaned it back to the federal government for a big, fat spread, according to a study requested by U.S. Sen. Bernie Sanders (I-Vt.) from the Congressional Research Service.
“This report confirms that ultra-low interest loans provided by the Federal Reserve during the financial crisis turned out to be direct corporate welfare to big banks,” Sanders said. “Instead of using the Fed loans to reinvest in the economy, some of the largest financial institutions in this country appear to have lent this money back to the federal government at a higher rate of interest by purchasing U.S. government securities.
“Instead of using this money to reinvest in the productive economy … it appears that JPMorgan Chase, Citigroup, and Bank of America used a large portion of these near-zero-interest loans to buy U.S. government securities and earn a higher interest rate at the same time, providing free money to some of the largest financial institutions in this country,” Sanders said.