After a Fed audit: 16 trillion in secret bailouts? Someone please tell me this is fake.
Observing members:
0
Composing members:
0
21 Answers
The rich get richer and us poor folks don’t stand a chance.
Yep, sorry, but its true.
Now you know why the demonstrations are being held.
@john65pennington you are right. This is the EXACT reason demonstrations are being held. It’s funny. Someone asked what everyone’s problem is with the fed. I hope they have read this. Central banks are bad.
It is a House of cards that cannot sustain itself. We are actually not poor, we hold all the power, just do not , or are afraid to wield it yet. The rich and status quo zealots count on it, and the media play up the great unwashed without a cause. But they said the same about civil rights, feminism, gay rights, abortion, and on and on..In time, they will feel the wrath of the growing, seed-like movement of anti-cronyism and fake economics. Keep digging for the truth. It is the only truth we really can trust.
There is some spin to the way it is cast, but the fact is that the Fed pumped upwards of $16 trillion into major banks and corporations on short-term loan basis to maintain their liquidity through the worst of the economic crisis deregulation of Wall Street by the Gramm-Leach-Bliley act precipitated. That’s more money than the entire annual GDP of the USA. But it is not national debt. It was in the form of short term lonans at lettle or no interest.
This is what the Fed was set up to do, maintain the liquidity of major banks in times of sudden market crashed so the domino collapse of the entire world financial system would not happen again after 1929. As galling as it is that it was necessary, rest assured you would have found the alternative of a 7th Great Depression far worse.
What we need to learn from it it to utterly reject those who argue that we must further deregulate banking, Wall Street and big businesses and that they will then “create jobs” instead of investing offshore where returns are high and they can go tax free. That argument is advanced only by the Greedy Oligarch Pigs, their paid water carriers, and the people they manage to dupe into destroying their own economic future to help our poor, poor billionaires and super-deprived millionaires grab an even bigger share of all the nation’s wealth.
There must be some reason for this. A story we don’t know or understand. Is this unusual or has the fed been doing it for many years? Why do they hand out the money and how do they decide who to hand it out to?
Remember this was lines of credit, not a transfer of money.The Fed didn’t give away that much, in fact it has been repaid on just about all of the TARP funds and the lines of credit have been greatly reduced.
The collapse of Bear Stearns and Lehman Bros. was essentially a loss of credit despite having billions and billions in assets.That lack of confidence was affecting everyone. By having the Fed guarantee payments, firms and banks could begin lending again.
@zenvelo Did you read the articles? ”$16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest.”
@zenvelo I guess it did have to happen to prevent disaster, but I also wonder like @wundayatta said: is this going to be the norm? Or was this a one time thing?
@Blackberry If we don’t return to adequate regulation of Wall Streetlike we had from the passage of Glass-Stegall Act in 1933 till it was gutted by the Gramm-Leach-Bliley Act of 1999, yes—it’s going to happen again and often. The current system privatizes all profits and socializes huge losses. By taking wild risks with derivative debt instruments leveraged 40 to 1, banks can reap obscen profits on transactions that add absolutely zero benefit to society. When such bets loose, they loose in spectacular fashion, but Congress has assured them such losses as socialized. It’s socialism for the wealthiest 1/10th of 1% and the 99.9% are on their own.
You can thank Roadblock Republicans in the Senate for making sure that the regulations Obama tried to introduce were watered down so much that too big to fail remains intact. Now they are campaigning to go much further. Republicans claim that there are no jobs because we haven’t yet transferred enough wealth to the “job creators” that fund them. Of course, they neglect to mention that these jobs will be created offshore and profits held in tax free accounts in amenable nations that allow such. But that’s boring details, and 9–9-9 is so easy to understand.
For someone like me who know next to nothing about how the FED works, the articles are somewhat one sided, not explaining what would have happened if the FED did not do what it did. Does anyone really know? I would very much like watch Ron Paul and Bernie Sanders debate Alan Greenspan and Bernanke. Maybe I’ll learn something. But thanks to @ETpro and @zenvelo, at least I got a sense of the FED’s side of the issue instead of just being bewildered about bailouts and secrets and shit.
@dannyc . I wish I could elaborate as well as you.
Great answer.
@mazingerz88
Here is Ron Paul debating a governor of the FED, way back in 1983.
I wish that although many people do not agree with what the media has told them about Ron Paul, that they can do their own research and realize that he is one of the very few people running for office, who understands and predicts the mess we are in, and how we got here.
I am not particularly outraged; the major job of a central bank is to be a “lender of last resort.”
I think calling them “bailouts,” while true, is overly emotional and a good way to misunderstand the issue. And the issue is, during the worst of recession, credit froze. Without credit, many—most, even—businesses cannot function. Your supermarket probably orders food each week on credit, for example.
So, that was very bad. Like, that’s the understatement of the century. It’s also the entire reason why the Fed and other central banks were set up. If normal banks lack capital to loan money to businesses, the Fed is designed to loan them money. You can call this a “bailout,” but it’s a necessary failsafe to protect the economy from complete ruin.
Now, $16 trillion, almost none of it having been paid back? I call bullshit. I love Bernie Sanders but I will need to see further corroboration of this claim before I believe it.
@Qingu Thanks for clearing that up.
I can’t read the pdf. Where does it say the 16 trillion in loans remain unpaid?
The sources I looked at do not mention the loans not being repaid. One source I found says “The report notes that all the short-term, emergency loans were repaid, or are expected to be repaid.”
Also: I find it strange that liberals are always the first to point out that corporations are not and should not be people… and then commonly proceed to anthropomorphize corporations.
Lending a ton of money to Citibank is not the same as the “rich getting richer.” It resulted in the rich getting richer. But that’s leaving out an important step. The corporate institution of Citibank is different from the wealthy individuals who work at and control Citibank. Now, if you want to argue that the individuals who work at Citibank should not profit from emergency loans made to the corporation Citibank, I would absolutely agree and I would absolutely support legislation to prevent that from happening. But too many people overlook this nuance.
According to the report, (Figure 31: Overview of TALF) as of June 29, 2011, $12.8 billion in Term Asset-Backed Securities Loans remain outstanding.
In 2009 and 2010, Federal Reserve Bank of NY earned about 400 million n interest income from TALF.
This is one of the lending programs. I’m still reading.
Also, “On Friday, March 14, 2008, the
Federal Reserve Board voted to authorize FRBNY to provide a $12.9
billion loan to Bear Stearns through JP Morgan Chase Bank, National
Association, the largest bank subsidiary of JP Morgan Chase & Co.
(JPMC), and to accept $13.8 billion of Bear Stearns’s assets as
collateral.31 Appendix IV includes more information about this back-toback
loan transaction, which was repaid on Monday, March 17, 2008,
with almost $4 million of interest. This emergency loan enabled Bear
Stearns to avoid bankruptcy and continue to operate through the
weekend.”
Page 99, GAO-11–696 Federal Reserve System
The Federal Reserve System earned $19.9 billion in revenue from the
broad-based programs and did not incur losses on any of the programs
that have closed. As noted earlier, financial stability—rather than profit
maximization—was the Federal Reserve Board’s primary objective when
designing these programs. TALF, under which FRBNY made $71.1 billion
of loans for terms of 3 or 5 years, is the only broad-based program with
loans outstanding. As of April 27, 2011, the Federal Reserve Board
reported that no TALF borrowers had chosen to surrender their collateral
instead of repaying their loans. As of June 29, 2011, approximately $13
billion of TALF loans remained outstanding out of $71.1 billion in total
TALF lending. The Federal Reserve Board does not project any losses
from TALF.
Answer this question 
