Federal Reserve's 'astounding' report: We loaned banks trillions

[AlphaCentauri]

Source: CSM

The Federal Reserve has lifted its veil of secrecy regarding special lending programs during the financial crisis, responding to a mandate from Congress by revealing the specifics of transactions with firms like Goldman Sachs and Citigroup.

Critics of the Federal Reserve are poring over the data, seeking red flags regarding potential improprieties. And Congress has asked its Government Accountability Office to sift through the numbers and offer its own analysis.

At the same time, it's possible that the release of details will end up largely vindicating the Fed for the massive financial support that it gave the economy at a time of severe stress. The emergency loans, in the view of many finance experts, helped to avert a much deeper economic slump. And those loans have now been largely paid back without losses to the central bank.

The numbers are staggering, encompassing more than a dozen emergency programs set up starting in 2007 or 2008. In one program alone the Fed doled out nearly $9 trillion in funds to borrowers such as Morgan Stanley and Merrill Lynch, largely at interest rates below 1 percent. (This program involved overnight loans, so the amount of Fed credit outstanding at any single point in time was much smaller.)



Read more: http://www.csmonitor.com/USA/2010/1201/Federal-Reserve-s-astounding-report-We-loaned-banks-trillions

[Rosa Luxemburg]

1. This is where it's all wrong!

[MichiganVote]

2. Great. So THEIR economy is saved and MAIN St. economy sucks-forever.

[No Elephants]

6. Further enriching the rich by impoverishing everyone else is the goal of plutonomy.

So, the good news is, at least one major system in America today is working exactly as intended. The bad news is that the system that is working is plutonomy.

[peacebird]

3. And those loans have now been largely paid back without losses to the central bank.

In the end - that is a huge takeaway point.

[dballance]

4. Nope it's not. They're just encouraged to do it again.

No one has been prosecuted and no one is in jail yet. So they'll keep on gaming the system as long as they can get away with it.

[Barack_America]

5. I'll wait for the GAO's assessment of that.

Or, preferably, one coming from a non-governmental source.

[jtuck004]

16. Bailout Not Over, Taxpayers Still Owed $2 Trillion In Federal Reserve Loans

and TARP Program Funds

http://www.commondreams.org/newswire/2010/09/30-11

To be honest one should also add over $1 trillion excess reserves held by the banks that the Fed is paying interest on

AND

An implicit $6 trillion guarantee on all the mortgages held by the GSE's;s - i.e Fannie and Freddie

http://nomiprins.squarespace.com/storage/bailouttallyoct2010.pdf

The 2 trillion is also substantiated here:

Total Wall Street Bailout Cost -
GRAND TOTAL: $4.72 TRILLION DISBURSED
$13.86 TRILLION MAX. AT-RISK
$1.93 TRILLION OUTSTANDING

http://www.sourcewatch.org/index.php?title=Total_Wall_Street_Bailout_Cost

And here:

"The bottom line is that $117.7 billion is still due to taxpayers under the financial industry part of TARP, and that $1.8 trillion is still due to taxpayers under various Federal Reserve programs as indicated in Table One above."

http://www.prwatch.org/node/9498

So, yeah, there is still a ton of unpaid money, and interest payments in the hundreds of billions that are not considered loans flowing into the 6 largest investment banks.

It is accurate to say TARP may have only lost a few billion (the books on that aren't closed yet)- but it is the height of hypocrisy and deceit to talk about it without talking about the whole bailout in total. For example, the Fed release today did not include money paid or guaranteed by the Treasury.

[Barack_America]

20. Thanks for the excellent information.

:hi:

It's pretty much what I expected.

[awoke_in_2003]

48. the GAO...

is one of the only true bipartisan parts of government. I, also, will wait for their assessment.

[girl gone mad]

9. How did these insolvent banks get the money to pay back Fed loans..

at the same time that they were funneling money out the back door through record executive compensation and bonuses?

Keep in mind, lending also dropped substantially over this time period.

Think about it.

[truedelphi]

14. Tax breaks, for these banks, and also the constant

and well heard pleas of "We are just too big to fail - you better keep giving us money or no more campaign donations."

Bernie Sanders is asking questions about the situation too. While everyone else is too "See No Evil! Hear No Evil! Speak No Evil!" if they are government officials and want to remain employed.

[girl gone mad]

18. It's a game of legerdemain.

Mark to Myth, use Fannie and Freddie as a bad bank to dump losses from toxic garbage onto the public, get Turbo Timmy to forgive your tax obligations, continuously shuffle the bad paper onto the Fed balance sheet in exchange for real money, loan those gifted dollars back to the government for a 5% no-risk return and keep the bonuses flowing.

But when all is said and done, they are no better capitalized than they were at the start of the crisis, and the rest of us are much poorer.

[truedelphi]

19. I get the feeling you are suggesting

no more bonuses.

Goldman Sachs recently bought an entire nature preserve in Patagonia. Patagonia. (They gotta make sure that there is little way for any Americans to get a job from the Bank Bailouts)

And good for their "Environmental record" as well.

If the big financial firms don't keep getting good money for their bad, how will they be able to continue in the manner to which they are becoming accustomed?

[awoke_in_2003]

50. This is off-topic...

but I looked at Patagonia's wikipedia page, where I found this photo. Absolutely breathtaking:
http://en.wikipedia.org/wiki/File:Cuernos_del_Paine_from_Lake_Pehoé.jpg

on edit- click on pic to enlarge- I cannot get it to post here.

on second edit- never fucking mind. I have no idea why these links are getting screwed up. Just go to wikipedia's Patagonia page and look at the pic with the subtitle "View of Cuernos del Paine from Pehoe Lake, Chile"

[JackRiddler]

51. Yup. Thanks!

[Igel]

33. It points out that a lot of it was overnight loans.

Think of it as a credit card.

I might rack up $2500 in credit costs and still feel like I have enough money to go out with the family to dinner. How dare I, when I have such debt? Still, it's paid off once a month, so while I could borrow up to $10k against it at any given time during the course of a given year I actually borrow closer to $28k. There have been times when it's rendered me insolvent--I lacked funds to buy food, yet still went out to dinner, knowing that the next month's paychecks would wash away the insolvency, and since no debts came due that I couldn't pay at no point was I actually insolvent.

A store I was with would play the same game with a line of credit. They had money in reserve, earning decent interest, and a $2 million line of credit. They'd routinely dip into the line of credit to build inventory, cover payroll, buy some equipment, but seldom did they have a balance on it for more than a few days. They'd borrow perhaps $15 million against that $2 million LOC per year and have a zero balance for well over 200 days.

Now look at the bank's perspective: They have $500 billion in lines of credit, and at any point all or none of it may be used. There'll always be some used, as a matter of course, but at certain points in the month and year they'll need more. So that money needs to be liquid, it can't be invested in anything that can't be painlessly and losslessly sold between 3:30 PM on a Friday and 4:01 PM on that same Friday. To maintain that much cash is a waste of investment opportunity and therefore income. In 2008 a lot of reserves were drained, a lot of liquidity was lost. When the reserve requirement was increased in 2008 or 2009 that created a new, unexpected bit of potential illiquidity. Under such circumstances a bank might have to cut lines of credit with no notice *or* they'd have to find a short term place to borrow $25 billion from Thursday afternoon to Friday morning *or* they'd be illiquid because of a 18-hour period of insolvency.

If a bank suddenly reneged on my credit cards Thursday at 6:15 pm with no warning, not because of any problem I had but because it had no money to front on my behalf, there'd be hell to pay. If suddenly the store I was with was told that it had no LOC it might have been forced to take some really damaging steps. In 1929 and 1930 we didn't have credit cards, but we still had short-term loans. Because banks couldn't front money for a few days a lot of businesses went belly up. If that happened in 2008 and early 2009, we'd be thinking how lucky we'd be to only have 9.4% unemployment. Hell, we'd be glad for 19.4%, given how lean most businesses are run today. (In other words, "if people only knew how much had been done for them that they weren't told about" cuts both ways.)

[snot]

10. Those NO INTEREST loans.

I know a few homeowners no less credit-worthy who'd have liked to borrow on those terms.

[Igel]

34. Mostly wouldn't have helped.

And actually, I do borrow on those terms.

Right now I owe $2000 interest free on my credit cards. It's a short-term interest free loan, provided I pay it off before the due date. I know people with far worse credit than mine who get the same terms, and people who have far larger short-term interest-free loans.

Looks different put that way, doesn't it? But it fits the description of what people are so envious that they don't have. Or, actually, do have.

Short-term often means 2-3 days, maybe a week, often overnight. So, fine: You can borrow $200k at 4:00 on Tuesday, but every dime gets repaid by noon the next day. So, how would that work out for you?

Some of the loans are large and longer term. On the other hand, with passbook interest at near 0%, 0-0.25% is what the Fed would wind up loaning at not because it's a bail out but because the Fed's using the interest rate as part of their monetary policy, trying to wrangle the economy. Much of the difference in these rates and my credit card rate reflects assessments of aggregate risk and unresolved bad debt, and that difference bothers me--not because I'm paying high interest rates (note that in 30 years of credit card use I've paid under $100 in interest, and that through my own absent-mindedness), but because of how much bad debt still exists and the level of risk that's perceived to hold.

[Dappleganger]

11. Banks used that liquidity to shore up their reserves and expand.

Without hiring people and without making most of that money available to the middle class for small business loans. IOW, interest-free loans on the taxpayers dime.

[girl gone mad]

12. A wealth transfer from the middle class to the banking oligarchy..

at the very least.

[liberation]

23. Those loans are not TARP...

... TARP was under a trillion.

[No Elephants]

25. LOL

[Raster]

27. Bullshit.

[TheWatcher]

46. Polly Want Some Propaganda?

[truedelphi]

7. Big K & R for report on the Fraudsters and the government that they bought

and paid for.

[truedelphi]

8. Anyone following the excellent site over on CNN:

money.cnn.com/news/storysupplement/economy/bailouttracker/

Has known about this for some time.

Breaks down who got what and where.

And don't forget - We the People got about 700+ billion ourselves - but then we should get something.

After all, we are the ones who are being hounded now that the bill has come due. We the People must pay back the government for its wisdom in giving the Plutocrats the Money that their cries of "Too Big To Fail" got them.

It might take our Social Security to help pay this back, but By golly, it's what Jesus would want, isn't it?

[unkachuck]

13. "...$9 trillion in funds to borrowers such as Morgan Stanley and Merrill Lynch, ..."

"The numbers are staggering,..."

....but no 18 billion for the unemployed?

....once again, the fetid stench of corporate money and power permeates our government and democratic institutions...once again, corporate stooges are balancing corporate crime on the backs of the working class....

....aren't you proud to be an American?

[CLANG]

22. Amen, brother! Where's the lousy 18 billion? FUCKERS!!!

[liberation]

24. That $18 billion will be found as soon as they can figure how to make money off the interest...

... until then, enjoy the tent city and the vans down the river... suckers!

[WillYourVoteBCounted]

15. are they trying to get out ahead of the next wikileak?

yep

[AlphaCentauri]

17. Good point n/t

[mikamandi]

21. BIGGEST U.S. PROBLEM: BIG BANKS

And here lies the single largest problem that is strangling
our democracy and our economy. The biggest investment banks
buy free reign, unlimited taxpayer loans and grants, little
regulation, and license to steal from us all. They caused this
recession. They are consolidating more wealth than ever
before, at the expense of the middle America masses who keep
sliding into poverty.  More importantly, the bankers also
successfully buy off and destroy any effort to change this. 

[aquart]

35. When stores went out and banks went in on every block and streetcorner

I knew the economy was in desperate trouble. But I couldn't explain why people should be frightened when a space where a retailer couldn't survive became a bank. I just knew it meant something was terribly wrong with our money.

[sarcasmo]

26. How can anyone argue against auditing the Federal Reserve.

9 Trillion in funds handed out to the bankers, and they don't want unemployment extensions.

[truedelphi]

30. But they are willing tohelp manage alol those Social Security monies that

Are just screaming to be privatized!

[No Elephants]

28. We will NEVER know what this has cost America and Americans.

http://www.google.com/search?sourceid=navclient&aq=0h&oq=hidden+&ie=UTF-8&rlz=1T4GGLL_enUS337US337&q=hidden+coats+of+tarp+bailouts



I don't want to play the silly source game, so here are about ten pages of google hits. Pick your own sources.

[Historic NY]

29. So why do we still have a 12-13 Trillion dollar deficit?

[obxhead]

31. Our endless pursuit of war. nt

[Amonester]

32. Short answer (and not really off-topic):

Illegal wars of aggression, bloated defense budgets (including 'private-sector' no-bid contracts), and last but not least... tax-breaks (and more often than not: 'tax-freedom') for the 'almighty' wealthy.

[ProudDad]

37. To build up the war machine...

Carter through Obama...

[naaman fletcher]

36. How do you loan money you don't have?

You print it. There is massive inflation. People say, no that can't be, prices are flat. But the point is prices would be much lower if not for this money printing. In essence it's a massive tax so that the bankers can keep getting their bonuses.

[ProudDad]

38. I think you're on to something here.

Normally there would be pretty hefty inflation but...

Since the economy tanked, we should be experiencing deflation...

So, indeed, the prices would be lower but for their artificially propping them up with inflationary monetary policies...

[blackspade]

39. We live in two economies.

The Wall St economy and the Main St economy.
Unfortunately they are not equal.
Wall St plays with Main St's money and not their own.
No risk, only reward for the rich.

[Lasher]

40. Good lord, we weren't even spectators.

And Congress had to force the release of this information. I'd say the Fed's days of impunity are numbered.

[unblock]

41. (... overnight loans, so the... credit outstanding at any single point... was much smaller.)

what an idiotic and highly misleading way of counting to goose the headline figures.
if i repeatedly borrow $1 overnight every day, i borrowed one dollar, period. you don't count that same dollar twice two days in a row, or as $365 if you did it all year.

if i have a $100,000 mortgage, i don't find an excuse to count it as a $36,500,000 in borrowing over the course of a year.


there were other programs with longer terms, so presumably this effect is lessened. the numbers probably reach into the trillions regardless, but the way they counted this one program as $9 trillion is misleading to the point of being fraudulent.

[Blue_Tires]

42. this is why i laugh whenever the WSJ refers to Obama as some market-hating anti-capitalist

[yurbud]

43. kick

[sarcasmo]

44. They are only releasing this information because of the push for an audit of the Federal Reserve.

[Alhena]

45. Why loan trillions when you can loan ... zillions?

[TheWatcher]

47. .....

[struggle4progress]

49. That's like 65% of our GDP. The fuggers handed out 65% of the US GDP

to private financial firms to cover the mistakes of the investors and to help pay their continuing bonuses

[Bigmack]

52. How can they still call this capitalism?....

When the government is this deeply involved in saving private corporations, how can we pretend this whole "hand of the market" bullshit any longer?

Trillions? Are you shitting me?

[StarsInHerHair]

53. "Spread the Wealth" $1 million for each American would be peanuts

compared to this, it would also stop the tidal wave of foreclosures, end poverty for most & propel us out of this depression/recession. $300 million dollars equals what, the Banksters' bonuses alone, not including their regular salary.

[boppers]

55. 310,850,141 on the US popclock (when I started writing this)

310,850,141 times a million (1,000,000) is 310,850,141,000,000, That's 310 trillion dollars.

Since your figure is "$300 million dollars", I will have to assume that maybe:
a) you meant giving every american a single one dollar bill
b) that there are only 3 Americans
c) your calculator is broken
d) your math teachers failed you


edit: word swap

[StarsInHerHair]

56. no it meant I'm exhausted but your sniping isnt appreciated

thanks

[boppers]

57. Being off by a factor of a million is unusual.

I hope you get some rest.

[western mass]

54. Obama is a socialist after all

corporate socialism, at its finest.