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Keoun and Kunts report: "It wasn't just American finance. Almost half of the Fed's top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-US lender, and Zurich-based UBS AG, which got $77.2 billion. Germany's Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees."

CEOs from eight of the largest US banks receiving government aid testify at a House Financial Services Committee hearing, 02/11/09. (photo: Brendan Smialowski/Bloomberg)
CEOs from eight of the largest US banks receiving government aid testify at a House Financial Services Committee hearing, 02/11/09. (photo: Brendan Smialowski/Bloomberg)

Wall Street Aristocracy Secretly Got $1.2 Trillion From Fed

By Bradley Keoun and Phil Kuntz, Bloomberg

17 August 10


Freedom of Information Act requests reveal that the TARP bailout was only the tip of the iceberg, with the Fed floating billions in below market-rate loans lacking any real oversight or public scrutiny. -- JPS/RSN


itigroup Inc. and Bank of America Corp. were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest US banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market's collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the US Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the US Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke's unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount US homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

"These are all whopping numbers," said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. "You're talking about the aristocracy of American finance going down the tubes without the federal money."

Foreign Borrowers

It wasn't just American finance. Almost half of the Fed's top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-US lender, and Zurich-based UBS AG, which got $77.2 billion. Germany's Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

The largest borrowers also included Dexia SA, Belgium's biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.

The $1.2 trillion peak on Dec. 5, 2008 - the combined outstanding balance under the seven programs tallied by Bloomberg - was almost three times the size of the US federal budget deficit that year and more than the total earnings of all federally insured banks in the US for the decade through 2010, according to data compiled by Bloomberg.

Peak Balance

The balance was more than 25 times the Fed's pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

The Fed has said it had "no credit losses" on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.

"We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the US taxpayer," said James Clouse, deputy director of the Fed's division of monetary affairs in Washington. "Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses."

While the 18-month US recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Odds of Recession

The odds of another recession have climbed during the past six months, according to five of nine economists on the Business Cycle Dating Committee of the National Bureau of Economic Research, an academic panel that dates recessions.

Bank of America's bond-insurance prices last week surged to a rate of $342,040 a year for coverage on $10 million of debt, above where Lehman Brothers Holdings Inc.'s bond insurance was priced at the start of the week before the firm collapsed. Citigroup's shares are trading below the split-adjusted price of $28 that they hit on the day the bank's Fed loans peaked in January 2009. The US unemployment rate was at 9.1 percent in July, compared with 4.7 percent in November 2007, before the recession began.

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the US, and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc.

Liquidity Requirements

"Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?" US Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. "They get help when the average businessperson down in eastern North Carolina, and probably across America, they can't even go to a bank they've been banking with for 15 or 20 years and get a loan."

The sheer size of the Fed loans bolsters the case for minimum liquidity requirements that global regulators last year agreed to impose on banks for the first time, said Litan, now a vice president at the Kansas City, Missouri-based Kauffman Foundation, which supports entrepreneurship research. Liquidity refers to the daily funds a bank needs to operate, including cash to cover depositor withdrawals.

The rules, which mandate that banks keep enough cash and easily liquidated assets on hand to survive a 30-day crisis, don't take effect until 2015. Another proposed requirement for lenders to keep "stable funding" for a one-year horizon was postponed until at least 2018 after banks showed they'd have to raise as much as $6 trillion in new long-term debt to comply.

'Stark Illustration'

Regulators are "not going to go far enough to prevent this from happening again," said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University.

Reforms undertaken since the crisis might not insulate US markets and financial institutions from the sovereign budget and debt crises facing Greece, Ireland and Portugal, according to the US Financial Stability Oversight Council, a 10-member body created by the Dodd-Frank Act and led by Treasury Secretary Timothy Geithner.

"The recent financial crisis provides a stark illustration of how quickly confidence can erode and financial contagion can spread," the council said in its July 26 report.

21,000 Transactions

Any new rescues by the US central bank would be governed by transparency laws adopted in 2010 that require the Fed to disclose borrowers after two years.

Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the US Supreme Court to keep at least some Fed borrowings secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world's largest banks depended on the US central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Morgan Stanley Borrowing

Two weeks after Lehman's bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had "strong capital and liquidity positions." The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley's Fed loans.

That was the same day as the firm's $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley's available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company's total profits over the past decade, data compiled by Bloomberg show.

Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to "fundamentally re- evaluate" the way it manages its cash.

"We have taken the lessons we learned from that period and applied them to our liquidity-management program to protect both our franchise and our clients going forward," Lake said. He declined to say what changes the bank had made.

Acceptable Collateral

In most cases, the Fed demanded collateral for its loans - Treasuries or corporate bonds and mortgage bonds that could be seized and sold if the money wasn't repaid. That meant the central bank's main risk was that collateral pledged by banks that collapsed would be worth less than the amount borrowed.

As the crisis deepened, the Fed relaxed its standards for acceptable collateral. Typically, the central bank accepts only bonds with the highest credit grades, such as US Treasuries. By late 2008, it was accepting "junk" bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation.

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an "unknown rating," according to the documents. About 25 percent of the collateral was foreign-denominated.

'Willingness to Lend'

"What you're looking at is a willingness to lend against just about anything," said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta and now chief monetary economist in Atlanta for Sarasota, Florida-based Cumberland Advisors Inc.

The lack of private-market alternatives for lending shows how skeptical trading partners and depositors were about the value of the banks' capital and collateral, Eisenbeis said.

"The markets were just plain shut," said Tanya Azarchs, former head of bank research at Standard & Poor's and now an independent consultant in Briarcliff Manor, New York. "If you needed liquidity, there was only one place to go."

Even banks that survived the crisis without government capital injections tapped the Fed through programs that promised confidentiality. London-based Barclays Plc borrowed $64.9 billion and Frankfurt-based Deutsche Bank AG got $66 billion. Sarah MacDonald, a spokeswoman for Barclays, and John Gallagher, a spokesman for Deutsche Bank, declined to comment.

Below-Market Rates

While the Fed's last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland's RBS Citizens NA unit with $10 billion, Fed data show.

JPMorgan Chase & Co., the New York-based lender that touted its "fortress balance sheet" at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank's 97-year-old primary lending program to help banks in a cash squeeze.

'Larger Than TARP'

Goldman Sachs Group Inc., which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Among the programs New York-based Goldman Sachs tapped after the Lehman bankruptcy was the Primary Dealer Credit Facility, or PDCF, designed to lend money to brokerage firms ineligible for the Fed's bank-lending programs.

Michael Duvally, a spokesman for Goldman Sachs, declined to comment.

The Fed's liquidity lifelines may increase the chances that banks engage in excessive risk-taking with borrowed money, Rogoff said. Such a phenomenon, known as moral hazard, occurs if banks assume the Fed will be there when they need it, he said. The size of bank borrowings "certainly shows the Fed bailout was in many ways much larger than TARP," Rogoff said.

TARP is the Treasury Department's Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided capital injections of $45 billion each to Citigroup and Bank of America, and $10 billion to Morgan Stanley. Because most of the Treasury's investments were made in the form of preferred stock, they were considered riskier than the Fed's loans, a type of senior debt.

Dodd-Frank Requirement

In December, in response to the Dodd-Frank Act, the Fed released 18 databases detailing its temporary emergency-lending programs.

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

Bloomberg News combined Fed databases made available in December and July with the discount-window records released in March to produce daily totals for banks across all the programs, including the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, discount window, PDCF, TAF, Term Securities Lending Facility and single-tranche open market operations. The programs supplied loans from August 2007 through April 2010.

Rolling Crisis

The result is a timeline illustrating how the credit crisis rolled from one bank to another as financial contagion spread.

Fed borrowings by Societe Generale, France's second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorized stock-index futures bets by former trader Jerome Kerviel.

Morgan Stanley's top borrowing came four months later, after Lehman's bankruptcy. Citigroup crested in January 2009, as did 43 other banks, the largest number of peak borrowings for any month during the crisis. Bank of America's heaviest borrowings came two months after that.

Sixteen banks, including Plano, Texas-based Beal Financial Corp. and Jacksonville, Florida-based EverBank Financial Corp., didn't hit their peaks until February or March 2010.

Using Subsidiaries

"At no point was there a material risk to the Fed or the taxpayer, as the loan required collateralization," said Reshma Fernandes, a spokeswoman for EverBank, which borrowed as much as $250 million.

Banks maximized their borrowings by using subsidiaries to tap Fed programs at the same time. In March 2009, Charlotte, North Carolina-based Bank of America drew $78 billion from one facility through two banking units and $11.8 billion more from two other programs through its broker-dealer, Bank of America Securities LLC.

Banks also shifted balances among Fed programs. Many preferred the TAF because it carried less of the stigma associated with the discount window, often seen as the last resort for lenders in distress, according to a January 2011 paper by researchers at the New York Fed.

After the Lehman bankruptcy, hedge funds began pulling their cash out of Morgan Stanley, fearing it might be the next to collapse, the Financial Crisis Inquiry Commission said in a January report, citing interviews with former Chief Executive Officer John Mack and then-Treasurer David Wong.

Borrowings Surge

Morgan Stanley's borrowings from the PDCF surged to $61.3 billion on Sept. 29 from zero on Sept. 14. At the same time, its loans from the Term Securities Lending Facility, or TSLF, rose to $36 billion from $3.5 billion. Morgan Stanley treasury reports released by the FCIC show the firm had $99.8 billion of liquidity on Sept. 29, a figure that included Fed borrowings.

"The cash flow was all drying up," said Roger Lister, a former Fed economist who's now head of financial-institutions coverage at credit-rating firm DBRS Inc. in New York. "Did they have enough resources to cope with it? The answer would be yes, but they needed the Fed."

While Morgan Stanley's Fed demands were the most acute, Citigroup was the most chronic borrower among the largest US banks. The New York-based company borrowed $10 million from the TAF on the program's first day in December 2007 and had more than $25 billion outstanding under all programs by May 2008, according to Bloomberg data.

Tapping Six Programs

By Nov. 21, when Citigroup began talks with the government to get a $20 billion capital injection on top of the $25 billion received a month earlier, its Fed borrowings had doubled to about $50 billion.

Over the next two months the amount almost doubled again. On Jan. 20, as the stock sank below $3 for the first time in 16 years amid investor concerns that the lender's capital cushion might be inadequate, Citigroup was tapping six Fed programs at once. Its total borrowings amounted to more than twice the federal Department of Education's 2011 budget.

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent US borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

'Help Motivate Others'

"Citibank basically was sustained by the Fed for a very long time," said Richard Herring, a finance professor at the University of Pennsylvania in Philadelphia who has studied financial crises.

Jon Diat, a Citigroup spokesman, said the bank made use of programs that "achieved the goal of instilling confidence in the markets."

JPMorgan CEO Jamie Dimon said in a letter to shareholders last year that his bank avoided many government programs. It did use TAF, Dimon said in the letter, "but this was done at the request of the Federal Reserve to help motivate others to use the system."

The bank, the second-largest in the US by assets, first tapped the TAF in May 2008, six months after the program debuted, and then zeroed out its borrowings in September 2008. The next month, it started using TAF again.

On Feb. 26, 2009, more than a year after TAF's creation, JPMorgan's borrowings under the program climbed to $48 billion. On that day, the overall TAF balance for all banks hit its peak, $493.2 billion. Two weeks later, the figure began declining.

"Our prior comment is accurate," said Howard Opinsky, a spokesman for JPMorgan.

'The Cheapest Source'

Herring, the University of Pennsylvania professor, said some banks may have used the program to maximize profits by borrowing "from the cheapest source, because this was supposed to be secret and never revealed."

Whether banks needed the Fed's money for survival or used it because it offered advantageous rates, the central bank's lender-of-last-resort role amounts to a free insurance policy for banks guaranteeing the arrival of funds in a disaster, Herring said.

An IMF report last October said regulators should consider charging banks for the right to access central bank funds.

"The extent of official intervention is clear evidence that systemic liquidity risks were under-recognized and mispriced by both the private and public sectors," the IMF said in a separate report in April.

Access to Fed backup support "leads you to subject yourself to greater risks," Herring said. "If it's not there, you're not going to take the risks that would put you in trouble and require you to have access to that kind of funding." your social media marketing partner


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-5 # cadan 2011-08-22 17:16
Did Obama know?
+19 # chick 2011-08-22 20:06
For Gosh sake did you not see when this crap started. 2008 Bush was the one who okayed this.
I disagree with him on many things but to blame him for everything is rediculous. Put the blame on who is to blame.
+9 # rf 2011-08-23 06:16
If it surprised him, don't you think he would have fired Geithner, summers, or some other republican supply side appointee? He is Wall St.'s man!
+7 # AndreM5 2011-08-23 09:08
Geithner and Summers weren't there either. It was Paulson and Bush. Got it?
+2 # Kimberly999 2011-08-25 06:57
He was helpless to stop it. The Fed secretly moved Trillions into the banking sector during the last year of the Bush Presidency. Paulson wrote the first formally acknowledged program with no rules for repayment or collateralisati on. There were even Wall Street insiders whose wives created companies to take advantage of the windfall.
+2 # lotuslover 2011-08-26 10:58
Did Obama know what? About the stuff that happened in 2006,2007 & 2008? Wouldn't that question be better addressed to GWBush? Or was he back in Crawford, TX clearing brush during that time?
+22 # fredboy 2011-08-22 17:17
But of course, this is to be expected.
The Federal Reserve tit is constantly covered by these swarming leaches.
+11 # LizR 2011-08-22 17:18
I predict a riot...
0 # Viejo 2011-08-24 09:22
+34 # noitall 2011-08-22 17:25
It sounds good to be one of the elite. The elite borrowing money from those who manage our money. Sounds like we need new managers and I'd suggest charging the banks for services the same way and rate that they charge us as their customers. Especially since all this money creation certainly lowers the value of my meager funds.
+9 # Activista 2011-08-22 17:50
look at the expressions of the USA oligarch in the photo above.
How dare congress flies to bother them!
+1 # John Talbutt 2011-08-22 18:11
I agree that the huge banks have too much power and I would like to see them nationalized.
But, in the meantime, since The Fed was paid back for the loans and almost all economist agree it prevented a collapse, the loans were a good move.
+48 # historyguy 2011-08-22 18:11
Why is it socialism for the banks and rich and the "free market" for the rest of us? We keep getting told of the merits and wonders of the "free market," but now see that the only thing that is free is bail-outs for those making gazillions of dollars and bankruptcy for working men and women. Has anyone commented that Communist China seems OK; not to mention the Social Democratic nations of Sweden, Norway, and the rest.
+28 # 2011-08-22 18:13
So here we are. Banks were to big to fail. I thought I understood at the time. Without the FED to loan them money, we all would have gone down the drain. I wonder if they are also to big to succeed for the future as well. What a mess. Most of the CEO's ought to be in jail by now and their enormous salaries
plus bonuses returned.
+7 # NanFan 2011-08-23 08:41
Most of the CEO's ought to be in jail by now and their enormous salaries plus bonuses returned.

Returned to the America public who make below $1 million per year in income! No...let's say less than $200,000...that 's right. I want my money back!

+31 # soularddave 2011-08-22 18:15
The article states: "Fed officials argued that releasing the identities of borrowers would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the US Supreme Court to keep at least some Fed borrowings secret."

I favor a 'perp walk' for heads of failing banks if they want Fed money. How do homeowners who have been foreclosed on feel about leaving their homes and neighbors?
-34 # ninefongs 2011-08-22 18:19
This is the number one reason we should vote Ron Paul 2012.
+54 # Bryan 2011-08-22 18:47
I'll take Elizabeth Warren's regulation of the banking industry over Ron Paul's deregulation any day.
-8 # ninefongs 2011-08-23 09:22
Regulation of the banking industry just creates more mechanisms that only the big players can afford to use and manipulate and strengthens the symbiotic relationship between the government and big finance which is what led us to this mess in the first place.
+1 # Kimberly999 2011-08-25 06:58
That isn't necessarily true. You can tell its a boondoggle if the rules are too complicated and unenforced.
+5 # racp 2011-08-23 11:34
Quoting Bryan:
I'll take Elizabeth Warren's regulation of the banking industry over Ron Paul's deregulation any day.

And twice on weekdays.
+38 # chick 2011-08-22 20:12
A Republican? You seem to forget so easily this was okayed by your President Bush in 2008.

Thank you but no thanks. No more Republicans to take away my rights and womens rights and workers rights. I do not want to go back to 1890
+1 # ninefongs 2011-08-23 09:27
I voted for Obama in 2008. Please don't jump to conclusions.

Most Democrats and Republicans behave the same way anyway. They change with the wind and just do what their campaign donors and lobbyists tell them to anyway. I thought Obama represented change, but I was wrong. He is just a puppet for the corporate elite.

As far as rights go, Ron Paul believes it should be in the States hands so there is no reason to be concerned about this if he is president.
+1 # Viejo 2011-08-24 09:12
I have thought that the solution to our problems would be to just forget the R's and D's and when we (the working class who are the vast majority of voters)vote next time just reach into a hatfull of third party candidates and go with them....BUT.... I'm certain that, just as soon as they were sworn in, the BGB's would co-opt them as well. The election process just doesn't seem to work for us. Maybe its time for the "Dictatorship of the Proletariat."
+2 # Viejo 2011-08-24 09:02
Wake up, Friend, you ARE back in 1890.
+3 # in deo veritas 2011-08-22 18:19
Bermacke and his crew should go to jail. If Obama continues to support them it makes him just as guilty. NONE of those lousy foreign banks should have gotten T a cent. They are the enemy.The Fed has long outlived it usefulness to the American people and should be shut down.
+20 # angelfish 2011-08-22 18:44
Nice. So, WHEN does John Q. Public EVER get THAT kind of accommodation from a Bank in these, once GREAT, United States of America? These egregious "ME FIRSTers" all fed at the Federal Trough at OUR expense, yet, they STILL sit on their hands and refuse to lend. No decent Mortgages, no decent Car or Home Equity Loans, Zip-ola from these slobbering HOGS that gorged on OUR dime and gave THEMSELVES Mega-salaries, "Perqs" and Benefits while American children CONTINUE to go HUNGRY! Hey, Mr. Boehner! THIS is alright with you? THIS is your vision for America! I take comfort in the realization that, what goes 'round, eventually COMES 'round. I just grieve for all this ARTIFICIAL Bull-Puckey that they're "too big to fail"! They FAILED the minute they sold themselves to Mammon! ...and STILL they do not mend their ways, they have NO guilt, NO shame, Nada. Not to worry, the "great unwashed" will eventually rise up and "even" the playing field. Sooner than later, perhaps?
+7 # NanFan 2011-08-23 08:43
And 45 million Americans are on food stamps. That's 15% and increase of 45% since the 2008 load placed on the common American.

Sick, sick, sick.

-14 # MidwestTom 2011-08-22 19:05
This flood of money is the main reason for the growing gap between Wall Street and us. I agree that Ron Paul is the ONLY politician I really believe would attack the Fed, and put a stop to the Credit Default Swap gambling. The Mises Institute argues that we would be better off if there had been no bailouts. They say that we would have one really tough 9 to 12 months, but the economy would have righted itself and started growing at a good pace.
+9 # Capn Canard 2011-08-23 09:42
MidwestTom, I can only see that as your fantasy. The growing gap can be traced back to around 1980 when then newly elected Ronald Reagan seemed to give the thumbs up to those who demanded that they get even more greedy. It was a cultural shift that has seemingly only increased since 1980. Prior to 1980 the numbers show a ratio of 30:1 for CEO pay to line worker pay and here in 2011 it is currently hovering at 500:1. That is an exponential increase of over ten times in less than 30 years. That cannot bode well for economic stability. Given those numbers, it looks like your magic of the market is black magic.
+28 # antineocon 2011-08-22 19:28
+10 # charsjcca 2011-08-22 19:37
The same folks who took the money and ran are the same folks who keep saying that democracy is good for the middle east. NOT TRUE.
+7 # grannym 2011-08-22 19:38
Right - "the fire next time" - and when it comes, even the obese rich will be hit.
+5 # charsjcca 2011-08-22 19:35
This is NOT a secret. They got to the table first. Reality politics.
+6 # grannym 2011-08-22 19:37
Our President should be ashamed. He has given away the country to the fat, fat, obesely rich cats. Why can't we get Russ FEingold to run?
0 # rsb1 2011-08-22 20:06
Interesting. How many of the companies receiving funds have a Rothschild connection ?
+11 # VSweet 2011-08-22 20:46
What?? Does Washington expect the average working clas American and poor to make MORE sacrifices? After reading this article, I am so fed up!!
+5 # Paul Scott 2011-08-22 22:33
The voters are just as stupid as Congress believes them to be. A couple years back Congress made loud talk about stopping high interest rates on credit cards. I was using a Capital One card at 4% interest. After Congress took action, to protect me, My Capital One card rate went to 17.9%. A lesson in reality; banks can and do borrow money, at 2% interest from the government; and charge the consumer 18-25% interest for using their own money. You get a better deal from the neighborhood gangs, they may take from you what they want; but you don't pay them a salary with medical and retirement benifits for life.
0 # Capn Canard 2011-08-23 09:52
the PROBLEM IS MONEY. We need to eliminate currency as a means of trade, or at least take out the greed/accumulat ion of currency as something that is beneficial for people. Why not have a system that rewards people of actions that provide real tangible benefit? As the current system rewards net accumulation and appears to damn the net good, benefit, or quality. After all that good is merely a byproduct of the demand for profit or accumulation of all that is profitable.
+4 # barryg 2011-08-22 23:31
No one is asking where the profit on the loans went. The fed is a private bank so it went to the very wealthy very private owners, not back to the US government. They engineered the crash and did well off it. Did the same in 29. And the savings and loan.

Why does the populace never learn? People act surprised by this news. Its unfortunately business as normal.
+5 # ddnursense 2011-08-22 23:31
We need to charge banks for everytime they dip into the Central such a rate that makes it a very profitable..for the government...Us e this interest to fund healthcare programs...
+2 # futhark 2011-08-23 00:19
Enough welfare for the rich! Stop it NOW! I'm certain Mr. Obama must have known. And I am not a racist. I didn't vote for the black male candidate, I voted for the black female candidate, Cynthia McKinney.
0 # claw 2011-08-23 01:58
A very informative article. Unfortunately there is no mention of any legal or regulatory breaches involved in the statements made by the bankers about having no problems or, indeed, the lack of disclosure.

Most stock exchanges, including New York, have rules, sometimes backed up by legislation, regarding the requirement to disclose price sensitive information to shareholders and the market as a whole. Surely needing to borrow USD50 - 100 Billion amounts to price sensitive information. Are the New York Stock Exchange, the SFC, the New York Attorney Generals office etc investigating these aspects?
+7 # Carolyn 2011-08-23 02:24
We must pass Glass-Steagall over Obama's veto. This is the only step to take. It was created by the man of the people
FDR in 1933. It save our country from the global banks then and can do it now. Email or call your congress people and senators and demand that Glass-Steagall be passed. Otherwise, our children and grandchildren will live in the new Dark Age.
Look up the Hegel Dialectic on the internet and you can read how this current situation has come about.
+6 # 2011-08-23 03:04

This is old news. It is most likely that no one at the Fed notified anyone in the White House about the loans. They are "routine" and they have all been paid back.

The Fed "routinely" does not tell people about these short term loans because they say that they do not want to cause bank runs.

We can be outraged that the Fed does this sort of stuff routinely but it is hard to be outraged at any administration. The only reason we happen to know about this series of transactions is that an FOIA request was approved by the courts after the Fed had "routinely" denied the requestor the information.

We all need to join with Bernie Sanders and Ron Paul in calling for an audit of the Fed. That is the only way to make the machinations of the Fed clear to the American people.

Lee Nason
New Bedford, Massachusetts
0 # Aaron Tovish 2011-08-23 03:52
Is it of no interest to anyone that the loans have been repaid? And at a profit? (Even the other sort of buries this 'minor' point.) Perhaps the profit should have been larger, but that is an entirely different scale of dispute.
The reason the Fed did not offer loans to people with mortgage problems is that these people were NOT going to be able to pay them back. They were living beyond their means. Who shares responsibility for getting them to over-spend is an important issue, but again a different dispute.
The fact that no other lender was ready to step in may or may not indicate that unwarranted risks were being taken. It could be that the sums involve were just too big for anyone but the FED.
The only serious problems I see here are: collateral and the secrecy.
If the collateral was good, then there should have been no need for secrecy. If they were not good, then I guess we are just damn lucky the operation worked out or we would have been left holding the bag. What give the FED the right to expose us to such risks?
+5 # racp 2011-08-23 12:03
In your dreams! You are not a banker or needed the Fed support. You don't make a profit charging 1% on the money you lend and paying 2% on the money you borrow. Even if they pay you back all the principal and interest. You are still 1% behind. Got it? In other words, by taking this money in secret and buying TBill, the banks were making 1-2% on 1.2 trillions they borrowed from the Fed! That's the innovation rewarded in Wall Street. And BTW, I also think the lenders are responisble for the money they lend. If the banks gave money to people that cannot pay it back, then banks are responsible for not being able to pay back the money they borrowed. Why does that make them different from people that bought a house and now cannot afford it? oh, yes! Because the people lost their jobs while the "masters of the universe" keep paying themselves huge bonuses with the money they are making with the FED plans. They are still kicking the ball around, make them recognize the losses from poor lending practices and then tell me if they can repay anything. The dodgy debt is still in theirs books... and they are waiting to pass those losses to the FED too.
+7 # seeuingoa 2011-08-23 04:49
You had an American revolution in the
You don´t think it is time to start
another one?

+3 # Ellie 2011-08-23 13:44
Yes, it is time for the People to rise up and get rid of these CROOKS one by one HOOKorbyCROOK. Get rid of them what ever way that can be done
+5 # erogers 2011-08-23 16:25
The Brooks Brothers suits and those ties are worth more then the average family makes in a year. Bunch of damned gilded age crooks with no morals, no ethics, no conscience. If this is what our elite business schools churn out then we are doomed. Jail them, jail everyone of them and jail the architects within our government that helped make this possible. I say absolutely NO to a Republican, Democrat or Tea Party candidate. Give me Bernie Sanders of VT. The only one who has truly taken a stand against these crooks. Ed
-2 # Howard T. Lewis III 2011-08-24 12:49
Blankity-Blankf ein will slither down the road so his new-name successor can take up on the same gash to the jugular that Blankity established. He is only part of a concerted assault that includes HAARP warfare, 9-11, and the Maconda prospect intentional oil-well blow out.

Before you argue, do your homework and you will find enough material to reconfirm this a hundred times over. Bush41 pushed the stock-market and banking deregulation and the Grand Patron of freemasonry, queen Elizabeth, knighted him for it. Read up on this for all the proof. See and 'Angels Don't Play These Harps' and The History Channel's 'Weather wars? That's Impossible' on Youtube. They demonstrate how it is being done. allows you to witness these lethal and destructive attacks on America will Al 'I got a 'D' in natural science' Gore tries to whip up a little fear with his lameass 'Global Warming' gibberish.
+3 # annualoath 2011-08-24 19:52
look, i think there are plenty of valid viewpoints amongst everyone. in my view i think it may be time to accept that america has always been a business. it may have been touted as a "republic", a "soverign nation", "land of the free, home of the brave", and all that garbage. truth be told it's always been about those with the wealth, and the business they could generate at our expense and on our backs. they needed us, working poor, to multiply and magnify there fortunes over the generations. they've slowly taken control of the constitution (stole it), now they own the government, the media, the military, the religion, all the important institutions that really matter. hence, they own all the wealth. it's RUTHLESS BARE BONES CAPITALISM. from day one that's what it's always been about. you and me mean nothing. never have.

if we're too lazy to do something about it, then we'll get just what they want to give us and that's nothing. there will be only a rich class and a poor class.and there will be nothing but tough times for a long time for all. whether there's a revolt or not, either way, tough times are ahead
-3 # Robt Eagle 2011-08-25 12:12
Obama is doing a great job of fixing this financial crisis that was cooked up when the Dems owned the Senate and the House in the last two years of GW Bush. Oh, and Barney Frank and Christopher Dodd were knee deep in promoting Fannie Mae and how great it was doing for the common man as the top ranks at Fannie took huge bonuses. Read Gretchen Morgenson's recent book "Reckless Endangerment" about what transpired to bring about the financial crisis we are so deeply in right now.
+2 # BVA 2011-08-25 15:13
A question for every Republican presidential candidate:

"The Obama administration appears to have delayed (deferred, suspended, or slowed) prosecution and civil litigation against executives of banks, mortgage companies, and other financial entities presumably until the economy recovers sufficiently so as not to interfere with that recovery.

"Do you, sir, plan to reinstitute and/or reinvigorate these deferred investigations, prosecutions, and civil litigations against financial executives and entities implicated in causing the economic collapse when the economy recovers?"
0 # giraffee2012 2011-08-27 02:47
These big $$ people's motto: You help me and I'll help you -- both doing dirty deeds on the backs of the poor/mid. One day, one of them will screw another big $$$ and then we may have hope.

The SILENCE from the Dems ==== they too are in bed with big $$$?
My 40 something year old kids think President Obama is threatened for being black and minorly for being a dem.

They used to wear white hoods and hand blank people from trees; Today they put them in jail for possession of 1.1 oz of marijuana (more blacks in jail than whites for same crimes) and look at Texas: You're a minority of any color and accused of a crime, they hand em fast - like within a month without even a check on DNA etc.

These rich are mostly white white collar people -- and I hear the bigotry even in liberal CA state.
0 # amye 2011-08-28 20:48
Criminals and crooks all of them! The Banks, The Fed, The Administration, and the Congress! They are stealing our tax money, our homes, and our 401K! Next will be Social Security and Medicare! All this will be done without any of them going to prison!!

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