Secret Fed Loans Gave Banks Undisclosed $13B

[Huey P. Long]

Secret Fed Loans Gave Banks Undisclosed $13B
By Bob Ivry, Bradley Keoun and Phil Kuntz - Nov 27, 2011 6:01 PM CT
Bloomberg Markets Magazine

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse. A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.

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http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

[phasma ex machina]

1. "The last duty of a central banker is to tell the public the truth."

–Federal Reserve Board Vice Chairman Alan Blinder, Nightly Business Report, 1994

[Huey P. Long]

2. indeed-

'The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.'

[bhikkhu]

3. ...a secret that has been in the news regularly since the program was announced

though, in fairness, the volumes of details haven't always been available - only the cumulative numbers and the general picture of the purpose, function and scope of the program.

...in any case, this one repeats the numbers of the previous ones, and at least doesn't imply that the loans weren't paid back - which they were. It does correctly state that the real issue and the legitimate gripe that many have had is that the loans were made at a lower than market interest rate. If you look at the "$13 billion in handouts", what they are talking about is the difference between the interest earned, and the interest that could have been earned if market rates were charged.

Perhaps more money should have been made, but there were and are more important things to worry about.

[banned from Kos]

4. Exactly. $13 billion was cheap. Its amazing that when the Lender of Last Resort

performs exactly as designed people get pissed off. And the Fed paid taxpayers $125 billion in 2009-10 in interest earned from these loans.

The magnitude of the 2007-08 crisis was unprecedented and worldwide.