The insanity of ECB lending - How Goldman Sachs has already taken over

On the 21st of December, the ECB  "lent" 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years.  I say "lent", but in reality, they just ran the printing presses. The ECB doesn't have the money to lend. It's Quantitative Easing again.

The money was gobbled up virtually instantaneously by a total of 523 banks. It's complete madness. The ECB hopes that the banks will do something useful with  it - like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonusus with the money, that's fine. Or they might just shift all the money to tax havens.

Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%?

I'm sure that all of these governments would be happy to implement a variable rate FTT that would guarantee that the money was paid back at the same 1% interest rate proposed to the banks.

Do you think that Mario Draghi, the new president of the ECB, who was vice-president of Goldman Sachs Europe from 2002 to 2005, may have decided to hand the 489 billion to the banks because he is primarilly interested in helping out his banking friends? Can he really be working in the interests of European Citizens?

Article 123 of the Lisbon Treaty prevents the ECB from lending to governments. Can we have the treaty changed to prevent Goldman Sach's ex-European Director from printing money to hand to his chums in the banking sector?

My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. "We want half a billion of really cheap money!!" they say.  OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the annoucement, the money has already disappeared.

At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control. Very, very worrying indeed.

Oh, by the way, I decided to put "Goldman Sachs" in the title of this post. The last time I did that, I got a record number of hits - it's my second most popular posting, with 166 visits and counting. I suspect that Goldman Sachs probably has an army of people watching the web to pick up on any mention of their name. So, can I wish all of you at Goldman Sachs a very happy 2012?