When the banks got bailed out, people were reasonably upset — why should huge corporate banks be given public money to recover from the disaster of their own greed and incompetence? Others argued that letting those banks fail would send the economy into a further tailspin. Either way, it happened, and that was that. The banks weren't going to get even more public money, right? Not exactly.
That the New York Fed would shower favors on a big financial institution may not surprise. It has long shielded large banks from assertive regulation and increased capital requirements.
Still, last week's details of the undisclosed settlement between the New York Fed and Bank of America are remarkable. Not only do the filings show the New York Fed helping to thwart another institution's fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.
Morgenson goes on to explain how the New York Fed released Bank of America from some substantial legal claims brought against it from cases involving toxic mortgage holdings from the 2008 financial crisis. The New York Fed, which oversaw a company called Maiden Lane II, which had the right to sue Bank of America over those holdings, could have reaped billions of dollars for taxpayers in claims. Instead they let them off the hook for almost nothing.
Ohio Senator Sherrod Brown told the Times that the Fed's action "underscores that the more we learn about these bailouts, gifts and advantages that Wall Street gets, the clearer it becomes that one set of rules applies to the largest megabanks and another set of rules to the smaller financial institutions and the rest of the country."
The bank bailouts are still happening. They're just not voted on anymore.