Skip to comments.Greece in trouble, now junk status but what happened to that $421.8 billion the Fed loaned out?
Posted on 04/27/2010 5:08:11 PM PDT by The Magical Mischief Tour
So Greece is now cut to junk by Standard and Poors.
Worries growing about complete default.
So my question goes back to this article speculating that the Fed had bailed Greece out with a loan of $421 billion.
So my question is simple, where did that $421 billion go?
Silly question. ;-)
Gone. Spent it. Anything else you want to know?
“the Fed had bailed Greece out with a loan of $421 billion”
Their has been speculation as to where this money went. I wonder if it is so?
“Their has been speculation as to where this money went. I wonder if it is so?”
And what are those speculations?
That was a required accounting adjustment. Denninger should try reading the footnotes sometime, he might embarrass himself less:
As of the week ending March 31, 2010, domestically chartered banks and foreign-related institutions had consolidated onto their balance sheets the following assets and liabilities of off-balance-sheet vehicles owing to the adoption of FASB's Financial Accounting Statements No. 166 (FAS 166), Accounting for Transfers of Financial Assets, and No. 167 (FAS 167), Amendments to FASB Interpretation No. 46®. Domestically chartered commercial banks consolidated $377.8 billion in assets and liabilities.
I think $420 billion should buy Greece lock, stock and Parthenon.
We didn’t bail out Europe. There’s no way the Fed can secretly bail out an entire group of nations.
The Europeans are having fiscal problems because of the great recession, but also because so far they want to unite partially but not completely in the same way the states are highly unified in the US. They want a common currency, a common central bank, and a coordinated economic policy, BUT they don’t want to be blend together and be completely unified and economically responsible for the other countries in the EU. Here in the US, we’re economically responsible for the other states to a large extent whether we like it or not. California has been subsidizing the other states for decades by paying much more into the treasury than it receives in federal spending. Now those roles may have to reverse and the federal government and the other states ultimately may have to guarantee California’s muni bonds to prevent the interest rates from rising up to unaffordable levels.
The Europeans don’t want to blend together and take on the problems or other countries and be economically responsible for other countries. So they have no mechanism currently to guarantee the sovereign debt of the smaller EU nations in a crisis. So sovereign bonds of Greece and Portugal are collapsing in price because there’s no EU economic authority to back them up. Ultimately the Europeans will have to decide if they want to really blend together economically and be responsible for each other, or whether they want to kick a few smaller and fiscally irresponsible countries out of their economic union.
It looks like they wanted to be an economic contender to the US and get rid of all the different currencies without thinking the EU all the way through, including how they would handle an economic crisis and plunging confidence in sovereign debt.
Damn... that's one fat accounting adjustment, can I do that to my savings account too!?!?!
Found related article. Doesn’t shed much light, but here goes:
THE U.S. FEDERAL RESERVE BALANCE SHEET EXPANDS DRAMATICALLY
Our friend, Larry Jeddeloh of The Institutional Strategist, in his Market Intelligence Report of April 14, 2010 brought an important point to our attention. He points out a large increase of $421 billion in the Federal Reserves balance sheet in the same week that the Greek Bailout took place.
The bailout for Greece was only $41 billion and the Fed balance sheet expanded by $421 billion in loans. What is going on? Obviously the Fed is lending a lot of money. Was some of it lent abroad? We do not know.
One other explanation is that the loans, the U.S. banks had kept off of their books in offshore SIVs [Special Investment Vehicles] are coming back onto their banks books, and the Fed is lending against them to provide liquidity for U.S. banks. This brings us to a major question that all investors and U.S. taxpayers should consider. How did the accounting profession allow this SIV type of activity, where banks were allowed to keep liabilities off their U.S. books in the first place?
Did The Fed Just (Surreptitiously) Bail Out Europe? - The ...
Did The Fed Just (Surreptitiously) Bail Out Europe? No, not just Greece - all of Europe. ... line is a gain of $421.8 billion dollars of outstanding loans and leases ...
The Greeks are learning Maggie Thatcher’s lesson. But with a twist.
Socialism works until you run out of other countrys’ money.
Even Denninger later admitted it was due to accounting changes in FASB.
Another real mystery about another $484B at the US Treasury.
“Now those roles may have to reverse and the federal government and the other states ultimately may have to guarantee Californias muni bonds to prevent the interest rates from rising up to unaffordable levels.”
There is something about sentence that reminds of a couple we used to dine with occasionally. They would always say, “Let’s just split the bill tonight” upon be seated. They would then proceed to order the most expensive items on the menu, including appetizers, desserts and lavish drinks. We tired of their company rather quickly.
Unfortunately, we can’t just remove California from the USA nor should we want to do such a thing. California can solve most of the problem with budget cuts. Barack needs California in 2012, so he’ll toss some bones.
California’s default would be horrific, but that’s not the default I’m most concerned about at this time. I think the economic policies of this administration are dangerous, the final rocket shot to insolvency that has approached slowly for over 50 years.
It’s a good thing the USA is too big to fail.
Half a trillion dollars (mas o menos) fixed by an accounting adjustment? Just asking ... ;-)
SEE the update at http://market-ticker.denninger.net/archives/2186-Did-The-Fed-Just-Surreptitiously-Bail-Out-Europe.html It was NOT the Fed loaning out money, apparently.