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Title: Breakdown of the $26 Trillion the Federal Reserve Handed Out to Save Incompetent, but Rich Investors
Source:
John Hively's Blog
URL Source: http://johnhively.wordpress.com/201 ... -political-power/#comment-1722
Published: Jan 23, 2012
Author: John Hively
Post Date: 2012-01-23 18:40:01 by Capitalist Eric
Keywords: None
Views: 8281
Comments: 22
Below is letter from former Congressman Alan Grayson. It’s a breakdown of the money the Federal Reserve gave out to save rich investors from their own incompetence. Everybody assumes the Federal Reserve was out to save the banks. That’s not true. The Fed was out to save wealthy investors. If they hadn’t, a lot of rich people would be applying for jobs at Seven-Eleven. A ton of political campaign money would have dried up. A lot of money that corrupts the political system would be gone. A ton of corruption would have died. Goldman Sachs would’ve disappeared into bankruptcy. So while saving rich investors from their own stupidity, the Fed was also ensuring the continued corruption of the corporate wing of the supreme court, congress and the presidency. There is one other matter I disagree with Congressman Grayson about in regard to the Fed’s actions. The Fed says most of the money it lent out has been paid back. That may not be true. If fact, it’s probably not true. The Fed may, or most likely, have simply cooked its own books to make it appear so. Maybe that’s why corporate profits are at record highs during this period of suppressed demand. How could they have record profits? How could they have paid back $26 trillion in loans in such a short time? That’s almost twice the domestic product of the entire United States. There’s only one answer. It’s not possible. They didn’t pay the money back, at least not most of it. The loans that were not paid back are being used to increase corporate earnings. The higher profits are going toward higher dividends and enhanced share prices for the wealthy. That makes the loans another conduit of unearned income for wealthy investors, as well as another pipeline for government corruption. Corruption is rampant, so don’t think the Fed is immune from it, since it saved the corrupters of Democracy, and likely made them richer in the process. Anyway, the link below takes a look at what President Obama may or may not have known about the $26 trillion and how his knowledge impacted one of the policies he proposed. The link below that is important information about the Federal Reserve. Congressman Grayson’s letter is below the second link. Click here for an analysis of what Obama may have known about the $26 trillion Who Holds the Federal Reserve Responsible for Its Actions? Dear John, I think it’s fair to say that Congressman Ron Paul and I are the parents of the GAO’s audit of the Federal Reserve. And I say that knowing full well that Dr. Paul has somewhat complicated views regarding gay marriage. Anyway, one of our love children is a massive 251-page GAO report technocratically entitled “Opportunities Exist to Strengthen Policies and Processes for Managing Emergency Assistance.” It is almost as weighty as that 13-lb. baby born in Germany last week, named Jihad. It also is the first independent audit of the Federal Reserve in the Fed’s 99-year history. Feel free to take a look at it yourself, it’s right here. It documents Wall Street bailouts by the Fed that dwarf the $700 billion TARP, and everything else you’ve heard about. I wouldn’t want anyone to think that I’m dramatizing or amplifying what this GAO report says, so I’m just going to list some of my favorite parts, by page number. Page 131 – The total lending for the Fed’s “broad-based emergency programs” was $16,115,000,000,000. That’s right, more than $16 trillion. The four largest recipients, Citigroup, Morgan Stanley, Merrill Lynch and Bank of America, received more than a trillion dollars each. The 5th largest recipient was Barclays PLC. The 8th was the Royal Bank of Scotland Group, PLC. The 9th was Deutsche Bank AG. The 10th was UBS AG. These four institutions each got between a quarter of a trillion and a trillion dollars. None of them is an American bank. Pages 133 & 137 – Some of these “broad-based emergency program” loans were long-term, and some were short-term. But the “term-adjusted borrowing” was equivalent to a total of $1,139,000,000,000 more than one year. That’s more than $1 trillion out the door. Lending for these programs in fact peaked at more than $1 trillion. Pages 135 & 196 – Sixty percent of the $738 billion “Commercial Paper Funding Facility” went to the subsidiaries of foreign banks. 36% of the $71 billion Term Asset-Backed Securities Loan Facility also went to subsidiaries of foreign banks. Page 205 – Separate and apart from these “broad-based emergency program” loans were another $10,057,000,000,000 in “currency swaps.” In the “currency swaps,” the Fed handed dollars to foreign central banks, no strings attached, to fund bailouts in other countries. The Fed’s only “collateral” was a corresponding amount of foreign currency, which never left the Fed’s books (even to be deposited to earn interest), plus a promise to repay. But the Fed agreed to give back the foreign currency at the original exchange rate, even if the foreign currency appreciated in value during the period of the swap. These currency swaps and the “broad-based emergency program” loans, together, totaled more than $26 trillion. That’s almost $100,000 for every man, woman, and child in America. That’s an amount equal to more than seven years of federal spending — on the military, Social Security, Medicare, Medicaid, interest on the debt, and everything else. And around twice American’s total GNP. Page 201 – Here again, these “swaps” were of varying length, but on Dec. 4, 2008, there were $588,000,000,000 outstanding. That’s almost $2,000 for every American. All sent to foreign countries. That’s more than twenty times as much as our foreign aid budget. Page 129 – In October 2008, the Fed gave $60,000,000,000 to the Swiss National Bank with the specific understanding that the money would be used to bail out UBS, a Swiss bank. Not an American bank. A Swiss bank. Pages 3 & 4 – In addition to the “broad-based programs,” and in addition to the “currency swaps,” there have been hundreds of billions of dollars in Fed loans called “assistance to individual institutions.” This has included Bear Stearns, AIG, Citigroup, Bank of America, and “some primary dealers.” The Fed decided unilaterally who received this “assistance,” and who didn’t. Pages 101 & 173 – You may have heard somewhere that these were riskless transactions, where the Fed always had enough collateral to avoid losses. Not true. The “Maiden Lane I” bailout fund was in the hole for almost two years. Page 4 – You also may have heard somewhere that all this money was paid back. Not true. The GAO lists five Fed bailout programs that still have amounts outstanding, including $909,000,000,000 (just under a trillion dollars) for the Fed’s Agency Mortgage-Backed Securities Purchase Program alone. That’s almost $3,000 for every American. Page 126 – In contemporaneous documents, the Fed apparently did not even take a stab at explaining why it helped some banks (like Goldman Sachs and Morgan Stanley) and not others. After the fact, the Fed referred vaguely to “strains in the financial markets,” “transitional credit,” and the Fed’s all-time favorite rationale for everything it does, “increasing liquidity.” 81 different places in the GAO report – The Fed applied nothing even resembling a consistent policy toward valuing the assets that it acquired. Sometimes it asked its counterparty to take a “haircut” (discount), sometimes it didn’t. Having read the whole report, I see no rhyme or reason to those decisions, with billions upon billions of dollars at stake. Page 2 – As massive as these enumerated Fed bailouts were, there were yet more. The GAO did not even endeavor to analyze the Fed’s discount window lending, or its single-tranche term repurchase agreements. Pages 13 & 14 – And the Fed wasn’t the only one bailing out Wall Street, of course. On top of what the Fed did, there was the $700,000,000,000 TARP program authorized by Congress (which I voted against). The Federal Deposit Insurance Corp. (FDIC) also provided a federal guarantee for $600,000,000,000 in bonds issued by Wall Street. There is one thing that I’d like to add to this, which isn’t in the GAO’s report. All this is something new, very new. For the first 96 years of the Fed’s existence, the Fed’s primary market activities were to buy or sell U.S. Treasury bonds (to change the money supply), and to lend at the “discount window.” Neither of these activities permitted the Fed to play favorites. But the programs that the GAO audited are fundamentally different. They allowed the Fed to choose winners and losers. So what does all this mean? Here are some short observations: (1) In the case of TARP, at least The People’s representatives got a vote. In the case of the Fed’s bailouts, which were roughly 20 times as substantial, there was never any vote. Unelected functionaries, with all sorts of ties to Wall Street, handed out trillions of dollars to Wall Street. That’s not how a democracy should function, or even can function. (2) The notion that this was all without risk, just because the Fed can keep printing money, is both laughable and cryable (if that were a word). Leaving aside the example of Germany’s hyperinflation in 1923, we have the more recent examples of Iceland (75% of GNP gone when the central bank took over three failed banks) and Ireland (100% of GNP gone when the central bank tried to rescue property firms). (3) In the same way that American troops cannot act as police officers for the world, our central bank cannot act as piggy bank for the world. If the European Central Bank wants to bail out UBS, fine. But there is no reason why our money should be involved in that. (4) For the Fed to pick and choose among aid recipients, and then pick and choose who takes a “haircut” and who doesn’t, is both corporate welfare and socialism. The Fed is a central bank, not a barber shop. (5) The main, if not the sole, qualification for getting help from the Fed was to have lost huge amounts of money. The Fed bailouts rewarded failure, and penalized success. (If you don’t believe me, ask Jamie Dimon at JP Morgan.) The Fed helped the losers to squander and destroy even more capital. (6) During all the time that the Fed was stuffing money into the pockets of failed banks, many Americans couldn’t borrow a dime for a home, a car, or anything else. If the Fed had extended $26 trillion in credit to the American people instead of Wall Street, would there be 24 million Americans today who can’t find a full-time job?
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Begin Trace Mode for Comment # 22.
#1. To: Capitalist Eric (#0)
And where did the USSA get $26 Trillion? Insolvency is not the same as bankruptcy.
True. With a net deficit (including all off-book debts) of $211 Trillion, we're bankrupt. If you make $50,000 a year, this would be the same as having (between your mortgage, credit-cards and car payment) a total debt of $7,033,000 (and change). In other words, every dime you will make in the next 14 years is already spent. And that's not counting minor things like eating. The debt has become the #1 factor affecting the overall global economy, because every other Western country is in the same boat with us... And so we will default, sooner or later. Oh, I know you'll say that this can't happen, when we can print money- or digitally create it out of thin air.... But inflating the money supply to cover the debt IS a default; it's just harder for the public to detect and understand... Anyway, we both know how that ends. The politically-connected do ok, but everyone else is thrown under the bus. The difference between now and either 1933 or 1971 (both years the government defaulted), is that there's nothing left to keep the artifice of our current economy alive. It's dying, and no amount of bubbles or government "control" will stop it. Indeed, the politically-connected see the writing on the wall and are trying to snatch whatever they can, before the collapse occurs. THAT is the real reason for the bailouts... to keep the illusion going a bit longer, while they line their own pockets. Foolishly, they believe they'll somehow escape the wrath of the public... [But they're turning the USSA into a police-state, just in case.] Thank "Helicopter" Ben Bernanke, and his digital printing press...
Thank "Helicopter" Ben Bernanke, and his digital printing press... But everyone on the receiving end have just turned around and parked this at the FR. The FR is the Quartermaster driving deflation as Credit collapses.
SURE they did... that's why inflation caused the various revolutions throughout the Middle East... food and other commodity prices have gone up ~50% in the last two years. DEflation? Yeah, right, buddy.... LOL. We're experiencing DEFLATION... LMAO.
FOMC: "if inflation shows signs of moving further below its mandate-consistent rate,” Bernanke said at a news conference today .... LMFAO What's the Bernanke worried about, eh, CE? 8D
LMFAO What's the Bernanke worried about, eh, CE? 8D He's building the justification for more money-printing, to keep his bosses (the mega-banks) happy. You aren't that naive, as to actually believe they're not going to stop printing, ARE you?????
You can't print numbers like $7.7 trillion and then leverage up 10x. And then All of the 'cybercredits just get parked back at the CB's cause no one can qualify for more loans. Except the Primaries (those zero % loans) who then go after Actual 'hands on' commodities. But the commodities have peaked now. Deflation = credit contraction See ConocoPhillips shutting Trainer, PA refinery for details.
mctoejam: You can't print numbers like $7.7 trillion and then leverage up 10x. My God, you really ARE that naive... Here, let me share a photo with you: Don't like that one? How 'bout THIS one? THAT's how they do it... Thanks for playing.
ZIRP is the death knell of an economy. See Japan at 225% debt to GDP for details. "Foreclosure inventory is near record levels and more foreclosures wait in the wings. Home sales has stalled and home prices continue to decline according to Case Shiller. Mike "Mish" Shedlock globaleconomicanalysis.blogspot.com Your house is worth less than what you think....that's credit contraction.
Your source is Mish? No wonder you're ass-backwards! Thanks for the laughs.
There are no replies to Comment # 22. End Trace Mode for Comment # 22.
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#2. To: mcgowanjm (#1)
Insolvency is not the same as bankruptcy.
And where did the USSA get $26 Trillion?
#6. To: Capitalist Eric (#2)
And where did the USSA get $26 Trillion?
#7. To: mcgowanjm (#6)
But everyone on the receiving end have just turned around and parked this at the FR.
The FR is the Quartermaster driving deflation...
#9. To: Capitalist Eric (#7)
#10. To: mcgowanjm (#9)
(Edited)
FOMC: "if inflation shows signs of moving further below its mandate-consistent rate,” Bernanke said at a news conference today ....
#18. To: Capitalist Eric (#10)
(Edited)
You aren't that naive, as to actually believe they're not going to stop printing, ARE you?????
#19. To: mcgowanjm (#18)
(Edited)
Capitalist Eric: You aren't that naive, as to actually believe they're not going to stop printing, ARE you?????
#21. To: Capitalist Eric (#19)
#22. To: mcgowanjm (#21)
Replies to Comment # 22.
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