Skip to comments.Report: Federal Reserve's Wall Street bailout topped $1T
Posted on 08/22/2011 7:57:23 AM PDT by Palter
The Federal Reserve extended over $1 trillion to the globe's largest financial firms during 2008's financial crisis, according to new analysis from Bloomberg News.
The $1.2 trillion that Federal Reserve Chairman Ben Bernanke pumped into companies to keep financial markets functioning is roughly equivalent to the amount American homeowners owe on delinquent or foreclosed mortgages, according to Bloomberg.
The new analysis is based on data released by the Fed following Freedom of Information requests and a lawsuit filed by Bloomberg, The central bank had been reluctant to release the data, arguing that making its lending public would damage the reputation of the firms doing the borrowing.
The information makes clear the outsized role the Fed played in the rush to avert a financial catastrophe in the final months of 2008. The Treasury Department's Troubled Asset Relief Program (TARP) has come to symbolize the government's bailout efforts, but the $160 billion the nation's largest banks received from the Treasury is a fraction of the Fed's outreach.
The high point of $1.2 trillion, which came on Dec. 5, 2008, also dwarfs the central bank's previous high point for crisis lending. The Fed loaned out $46 billion on Sept. 12, 2001, after the terrorist attacks against the World Trade Center and the Pentagon.
Morgan Stanley got the biggest piece of the pie, borrowing up to $107.3 billion of public money. Citigroup and Bank of America both tapped the Fed for nearly $100 billion around the same time.
However, the Fed's open hand was not just extended to American companies. Roughly half of the top borrowers from the Fed were based in Europe, such as Paris's Societe Generale SA and UBS AG, which is based in Zurich. The Royal Bank of Scotland borrowed $84.5 billion, the largest amount of any foreign bank.
The story asserts that banks would tout the ironclad stability of their finances, while secretly borrowing huge amounts from the Fed. For example, on the same September day Morgan Stanley touted its "strong capital and liquidity positions" in a press release, it also hit the $107.3 billion peak in Fed borrowing.
However, the Fed, which typically demanded collateral for the loans in the form of bonds, said it has had no credit losses on the emergency lending. A February report by the Federal Reserve Bank of New York indicated it actually made $13 billion in interest and fees on the efforts between August 2007 and December 2009.
The FED is the foundation of Progressive Government. If there were no FED, there would be NO WAY to institute long-term Progressive schemes.
Correct, if you hate big government. If you hate the welfare state, you must hate the Federal Reserve Corporation. Without the Federal Reserve, the welfare state is impossible.
Did the Fed lend Wall Street 1 trillion in existing currency or brand new currency?
I really don't like the implication there. I could be wrong, but to me that reads like "we should have given the money to people who couldn't pay their mortgages".
With the Federal Reserve you can bypass any Constitutional Amendment requiring a balanced budget. They just do what they da** well want to do.
Yeah, they added that point in. Not good. They could have easily said they same to pay off distressed credit card owners as well.
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Teddy Roosevelt proclaimed: the new nationalism rightly maintains that every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require it.
What it says to me is that our hallowed banks were much more insolvent that the detested “deadbeats” who supposedly outsmarted them.
Even with The mortages our financial wizards bought for their trusting depositors still on the books, the banks needed that amount given to them just to keep their other balls in the air.