IMHO either:
The Fed is biased toward former private employers and is being rewarded for failure and lies with new powers and renewed appointments of those responsible
or
That is the case and it is strategically exasperating problems to benefit those private interests.
If someone can prove the latter, they are smarter than me (big pool at PS.com), but I think the following will be key...
1. The 2007 implementation of FASB No. 157 "mark to market" accounting, generally accepted accounting principles (GAAP), forced banking interests to consolidate.
2. The promise of bail-outs for faulty assets in TARP was another measure for the same effect.
"Mark to market" or "fair value" accounting means that companies must value the assets on their balance sheets based on the latest market indicators of the price that those assets could be sold for immediately. Seeing as loans and securities make up the bulk of a bank's assets you can imagine how it effects their profit and loss statement. Particularly if the bank had just bought homes with an artificially inflated book value.
Before MTM took effect in 2007 banks could list the homes they owned at the book value. If the homes were artificially inflated in value, then over time, the value would drop and the bank would be worth less. But forcing a bank to list homes it owns at the price of if they had to sell it immediately had their equity shares (assets minus liabilities) plummet and forced bankruptcy. Many banks wouldn't have gone bankrupt because they would have sat on their non-liquid assets until home prices naturally lowered and investors had incentive to buy and over the course of the mortgage made that bank money.
Paulson promised TARP funds of 700 billion (which is 7 trillion when adjusted to a banks 10/1 fractal lending requirements) to buy up these troubled assets. With a huge public disapproval rating he literally got on his knees and begged Congress for the money, saying that it was the only way to avoid depression, and then privately threatened martial law to select Congress members if they did not comply.
Many larger/healthier banks bought the smaller/weaker bankrupt ones because the reason they went bankrupt was the troubled assets that TARP (the US tax payer) was handing out. When TARP passed Paulson said we can't bail out these troubled assets, and that the first 350 ( 1st 1/2 for Bush 2nd 1/2 for Obama) needed to be handed as the Fed saw fit, with no over site of accounting. Many of these larger/healthier banks were then bankrupt and ones that weren't were often pressured to take bail out money. Unbeknownst to the banks the bailout money came with the oversight requirements of the Fed.
The last time MTM rules were in effect was 1938. FDR ended it saying it caused banks to fail that wouldn't otherwise.
In April 2009 the adoption of FAS 141R and FAS 160 were instituted curtailing MTM policy, in addition to, putting the debt in the hands of taxpayers. Taxpayers were unable to sue banks for misrepresentation of contractual debt agreements due to a interest rate freeze made supposedly in their interest. It should be noted that Fed programs like TARP and PPIP are structured in a way which allows the Fed to tap back into tax payer debt to continue funding the programs.
The Fed will not allow audits, but with the total debt of the US at 57 trillion (or if you have access to the off balance sheet reporting like Dallas Federal Reserve Bank President Richard Fisher: over 99 Trillion), it's not hard to imagine what would happen if it were subject to MTM accounting.
That's 190K in the hole for every person in the US (based on 300K population) or 330,000 according to Mr. Fisher.
http://online.wsj.com/article/SB124303024230548323.html
I don't buy that the Quantitative Easing (Debt Monetization) policy of "Helicopter" Bernanke will gradually allow the US to raise interest rates as the economy improves (curtailing inflation); because our fundamental job market has been off-shored.
During the Great Depression 90% of people lived rurally, were largely self sufficient and production of world class goods constituted 70% of the economy.
Today we are import dependant because nearly 90% of the population is non-rural and consumption constitutes well over 70% of the economy.
I don't think this is a political issue as both the Bush and Obama administrations fully support the Fed; giving credence to the "two-headed one body" view of the political parties' fiscal policy. Furthermore, Obama is advocating powers to the Fed, for sole "systemic risk" over site of the financial markets.
My humble (non-inflation adjusted) .02 are: the US can either "sell" the world on forgiving our debt by ending the debt based monetary policy of central banks or inevitably face hyper inflation without having a competitive export market.