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Senator Bernie Sanders (I-VT), who describes himself as a socialist, was the force behind legislative language which forced the Fed to divulge details of the many aid and subsidy programs it ran in response to the recent recession. It's not a pretty picture; it does need the light of day. "It appears that we are very much a country in which we practice socialism for the rich and rugged capitalism for everyone else," Sanders said.

Sad thing is that he's right. Capitalism (I'm a self-described capitalist) only works when failure is an option for the rich as well as the poor, the powerful as well as the powerless. The state is more intrusive when it bails out a bank than it is when it provides unemployment insurance or even welfare. When institutions get so powerful that they can threaten to bring down the economy if they don't get what they want (aka too big to fail), it's time for a round of trust-busting like the one industrialist and Republican Mark Hanna was correct to fear when "that damn cowboy" Republican Teddy Roosevelt became president.

If it takes a socialist to wake us up to government and capitalism gone awry hand-in-pocket, so be it. The problem needs to be corrected, not ignored.

It is the role of the Federal Reserve to smooth the functioning of the banking system; it is even the Fed's role to keep the money moving in shocks like 9/11, which they did well. You would expect the Fed to be more active in a banking crisis than in normal times (although you might have also expected the Fed to see some of the problems which led to the crisis).

What you would not expect is to find that the chairman of the NY Fed at the time, Stephen Friedman, was a director of Goldman Sachs (NYSE:GS), which hit the Fed up for help 52 times and had a high balance of $18 billion after quickly turning itself into a bank to qualify for aid. It does not help that he was given a waiver by the Fed to continue as chair AND that, according to the NYTImes, he bought shares in Goldman while that bank was being bailed out by the Fed. BTW, two of the other nine members of the board of the NY Fed were the chief executives of GE (NYSE:GE) and JPMorgan (NYSE:JPM), both of which also received Fed support.

Other interesting information is that the Fed apparently felt that it also had to bailout investment funds headquartered in the Cayman Islands (where people and funds go to escape taxes), the Korea Development Bank, and the Arab Banking Corporation based in Bahrain (over $23 billion in loans at rates as low as .25%).

BTW, you shouldn't confuse the Fed bailouts with TARP, an entirely separate bailout to many of the same beneficiaries. The Fed is careful to draw that distinction on its website:

No rules about executive compensation or dividend payments were applied to borrowers using Federal Reserve facilities. Executive compensation restrictions were imposed by statute on firms receiving assistance through the U.S. Treasury's Troubled Asset Relief Program (TARP). Dividend restrictions were the province of the appropriate supervisors and were imposed by the Federal Reserve on bank holding companies in that role, but not because of borrowing through the facilities discussed here.

In other words, the profits banks made by receiving low interest money from the Fed and using that money for virtually risk free loans including buying U.S. Treasury Bonds (lending the money back to us) could be used to continue outrageous executive compensation or sustain dividends despite the losses the banks suffered by over-reaching. I'm not sure whether the Fed thinks this is reassuring.

The details now on the Fed website thanks to Senator Sanders are buried under paragraphs of self-justification from the Fed:

This section of the website provides detailed information about the liquidity and credit programs and other monetary policy tools that the Federal Reserve used to respond to the financial crisis that emerged in the summer of 2007. These programs fall into three broad categories--those aimed at addressing severe liquidity strains in key financial markets, those aimed at providing credit to troubled systemically important institutions, and those aimed at fostering economic recovery by lowering longer-term interest rates.

The emergency liquidity programs that the Federal Reserve set up provided secured and mostly short-term loans. Over time, these programs helped to alleviate the strains and to restore normal functioning in a number of key financial markets, supporting the flow of credit to businesses and households. As financial markets stabilized, the Federal Reserve closed most of these programs. Indeed, many of the programs were intentionally priced to be unattractive to borrowers when markets are functioning normally and, as a result, wound down as market conditions improved. The programs achieved their intended purposes with no loss to taxpayers.

"No loss to taxpayers" is, at best, disingenuous. The taxpayers got less than market-rate interest; what rates do you think these institutions would have charged to lend to borrowers as needy as they were at the time? Will a bank lend you money if all they get is "no loss". These institutions were bailed out, purely and simply. They were saved from failure; they were saved from the working of the market. The real loss, if we don't act to prevent this kind of abuse in the future, will be the free market itself.

Source: Goldman's Bailout and How to Save Capitalism