Posted on 12/02/2010 9:30:51 AM PST by FromLori
NEW YORK -- The Federal Reserve on Wednesday reluctantly opened the books on its monumental campaign to save the financial system in the midst of the recent crisis, revealing how it distributed some $3.3 trillion in relief.
The data revealed that the Fed's aid was scattered much more widely than previously understood. Two European megabanks -- Deutsche Bank and Credit Suisse -- were the largest beneficiaries of the Fed's purchase of mortgage-backed securities. The Fed's dollars also flowed to major American companies that are not financial players, including McDonald's and Harley-Davidson, through unsecured short-term loans.
The measure, initiated in Jan. 2009 to stimulate the flow of credit and keep household borrowing costs low, led the nation's central bank to purchase more than $1.1 trillion in mortgages packaged into the form of securities. The mortgage bonds are backed by Fannie Mae and Freddie Mac, the twin mortgage giants now owned by taxpayers.
Deutsche Bank, a German lender, has sold the Fed more than $290 billion worth of mortgage securities, Fed data through July shows. Credit Suisse, a Swiss bank, sold the Fed more than $287 billion in mortgage bonds.
The data had previously been secret. It was released Wednesday per the recently-enacted law overhauling the federal financial regulation. The Fed, ferociously backed by the Obama administration, fought lawmakers' desire for full disclosure throughout the financial reform debate.
The mortgage purchase program has come under withering criticism by economists and financial experts who believe the Fed's initiative has unnecessarily inflated the housing market, and prevented the cleansing that pretty much all experts believe is necessary for a full economic rebound. However, the program has also been heavily praised for preventing an Armegedon-type situation in which mortgage costs could have skyrocketed, collapsing the housing market and leading to even more foreclosures.
Data released Wednesday shows which Wall Street firms have been the biggest beneficiaries of the Fed's bond buying program. The fact that foreign lenders benefited the most is sure to irk lawmakers.
The Fed effectively telegraphed its intentions to the Street before buying the bonds. Legendary money manager Bill Gross, who oversees more than $1.2 trillion at Pacific Investment Management Co. said last month during a television interview that part of his success over the last 18 months was due to buying securities in front of the Fed, and selling them to the Fed at a premium, allowing him to profit handsomely. Gross runs PIMCO's $252.2 billion Total Return Fund.
Morgan Stanley sold the Fed more than $205 billion in mortgage securities from January 2009 to July 2010, while it's much bigger rival, Goldman Sachs, sold $159 billion. Citigroup, the nation's third-largest bank by assets, sold the Fed nearly $185 billion in mortgage bonds. Merrill Lynch/Bank of America sold about $174 billion.
It's not clear how much these firms profited by engaging in the kind of activity that allowed Gross to profit so well, known as "front running." However, it's abundantly clear that they did turn a profit.
JPMorgan Chase, the nation's second-largest bank by assets, sold the Fed about $153 billion worth of mortgage securities.
Other foreign banks with extensive Wall Street operations also profited from the program.
Barclays, the British firm that took over failed investment bank Lehman Brothers, sold about $123 billion in mortgage bonds. UBS, a Swiss lender, sold about $94 billion. BNP Paribas, a French bank, sold about $67 billion.
The Fed probably should be audited and I don’t think their hands are 100% clean, but basically I have to say you’re correct.
Getting rid of the Fed won’t be some magical solution, nor would ridiculous ideas like banning fractional reserve banking.
Too many people are willing to throw the baby out with the bathwater in these situations.
Before the federal government raises my taxes and cuts my future benefits......These foriegn banks should be made to pay back OUR money.
Wikileaks can get our military/intelligence secrets, but nothing that really makes Obama look bad.
Liberal Socialists stick together. :(
I think a lot of people don't realize the FED is actually already highly audited. It's just their policy decisons that aren't really audited. And most of those we know about as soon as they implement them.
The ones we don't know about, are typically loan arrangements with other central banks for currency exchange rate stabilization, or emergency lending like we've seen the last couple of years, and those would have an adverse effect to make public at the time they are done.
“The banks are sucking us dry, but at least we can ride a Harley to get a Happy Meal!”
Not in San Francisco.
Thanks FromLori.
Our country is broke - and the fed’s acting like a pimp at a nightclub filled with 18 year old girls. I’m sickened.
More like factual reinforcement for the school of thought that the Obama administration is made up of hooligans with really bad judgment.
http://treo.typepad.com/.a/6a0120a6002285970c013489af55b3970c-popup
That is all that I need to know!
Who gives a **** when the US dollar is going down to worthless!!!
From this site: http://www.gotgoldreport.com/
The recently deceased Richard Holbrooke became an instant millionaire through his position at Credit Suisse First Boston.
see : http:/www.townhall.com/columnists/joelmowbray/printjm20050505.shtml
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.