Fed Rescues (Bailouts) Detailed

Bloomberg has deconstructed The Fed’s secret lending programs and put forward a rather amazing abuse of the former 13.3 powers The Fed wielded during the 07-2010 time frame.

Among the findings:

  • More than $1.2 trillion in public money was provided to banks and other institutions during the time period in question.
  • A good part of the money went to foreign institutions, including RBS, Deutsche Bank, Barclays, Credit Suisse, BNP Paribas, Hypo and others.

As Bloomberg said:

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

That, of course, isn’t the real question we should be asking.  The real question is this:  Why is it that these institutions got these loans, and thus were protected from the consequence of lending irrationally along with selling knowingly-bad paper to others (remember, Citi’s former risk manager testified under oath before the FCIC that the bank was well-aware their loans were trash yet sold them anyway) while ordinary Americans were dispossessed of their homes and tossed on their ass?

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages.

Isn’t it funny how those institutions were protected while you were left to twist on the vine?  Further, The Fed did everything in its power to prevent these facts from becoming known by the public.

The worst part of this debacle isn’t that The Fed rescued these firms.  It’s that despite being the primary regulatory body of these large institutions it has done nothing to prevent a need for another rescue, including but not limited to dismantling the interconnected credit default swap market and forcing massive capital raises to be undertaken so that there is no chance of a future demand for the same sort of “accommodations.”

Might the attempted secrecy be because with the facts, along with the failure to prevent a now-apparently-emergent second need for even more of the same emanating from Europe, we would all demand the dismantlement of The Fed and imprisonment of the entire body of the FOMC?

I think so.

Got this?


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