Patriotic  Moms
  • HOME
  • PURPOSE
  • TEACHING OUR CHILDREN
  • HOLIDAYS
  • SONGS
  • ARCHIVES
  • CONTACT

$7.77 Trillion to Bail Out Big Banks

11/30/2011

1 Comment

 


Secret Bailouts Helped Biggest Banks Get Bigger

Picture
Excerpts from Bloomberg.com:  

"The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. 


Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.

A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger...."


                                                               *********



'Change Their Votes'
’“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. 'This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.'

The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.

The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma -- investors and counterparties would shun firms that used the central bank as lender of last resort -- and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.

$7.77 Trillion

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he 'wasn’t aware of the magnitude.' It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

'TARP at least had some strings attached,' says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. 'With the Fed programs, there was nothing.'

Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day...."
                                                                           *********

No Clue
Lawmakers knew none of this.

They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.

Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs.

Had lawmakers known, it 'could have changed the whole approach to reform legislation,' says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size....

                                                                           *********

Moral Hazard   
"Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard -- the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.

If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks.

Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.

"Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,' says Dorgan, who retired in January.

Getting Bigger
Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.

Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.

For so few banks to hold so many assets is 'un-American,' says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. 'All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.'

Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts."


Read More:  Bloomberg.com


1 Comment
Los Angeles Bail Bonds link
10/5/2012 11:13:46 pm

This is one of the best blogs Ive ever read. I am very happy after read your article. Thanks for the fantastic clarity inside your writing.I most certainly will directly grab your rss feed to remain up-to-date with any updates.

Reply



Leave a Reply.


    Archives
    Blog posts from May 2011 to June 2013 are here.  Click HOME for more recent posts. 


    Dates

    November 2020
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012
    March 2012
    February 2012
    January 2012
    December 2011
    November 2011
    October 2011
    September 2011
    August 2011
    July 2011
    June 2011
    May 2011


    If the category you are interested in is not listed, try using "Search" below.
Photos used under Creative Commons from norwichnuts, miamism, Јerry, nukeit1, rob_rob2001, terren in Virginia, Nadia Szopinska, makelessnoise, slagheap, ProComKelly, DonkeyHotey, Mike Licht, NotionsCapital.com, KAZVorpal, Randy OHC, Mankamundo PhotoArt, Kyle Taylor, Dream It. Do It. World Tour, Mark & Marie Finnern, ArtBrom, chimothy27, chany14, Sweet One, srslyguys, cliff1066™, p_c_w, Dave Dugdale, MCS@flickr, Randy Son Of Robert, richiec, woodleywonderworks, MCS@flickr, |vvaldzen|, JLStricklin, Coolstock, James Jordan, BenedictFrancis, StockMonkeys.com, analogophile, sheilaellen, Jeff Kubina, chrisbastian44, Kelly Schott, LeSimonPix ★, Congressman George Miller, benfff85, Marxchivist, Sunset Parkerpix, Mr. T in DC, merfam, cliff1066™, bingbing, tyhatch, David Paul Ohmer, pwbaker, uhuru1701, Jeff Kubina, kps186media, saccodent, Parvin ♣( OFF for a while ), Paul Lowry, Karen Roe, lucianvenutian, DTWpuck, srish, dailymatador, loco's photos, Governmentality, Base Camp Baker, Obama-Biden Transition Project, shalf, Ashborne Bristol Photography, losmininos, billjacobus1, laura padgett, Tracy O, ElvertBarnes, El Bibliomata, riptheskull, srqpix, vishwaant, longislandwins, How I See Life, mhaw, AlphaTangoBravo / Adam Baker, roger4336, Lisa Andres, Octavian Cosma, garlandcannon, Rambling Traveler, PBoGS, rkramer62, milan81, thivierr, Ernst Vikne, phil wood photo, jonfeinstein, Pip R. Lagenta, A. Strakey, charlesfettinger, a.drian, Beverly & Pack, Danny Novo, cliff1066™, Monticello Society, idntfd, Stinging Eyes, Jonathan Thorne CC, bigbirdz, DonkeyHotey, siegertmarc, bill85704, ourbethlehem, The History Faculty, ginnerobot, JoshuaDavisPhotography, Fort Bragg, turtlemom4bacon, VictoryNH: Protect Our Primary, Allie_Caulfield, KAZVorpal, Paul J Everett, Austen Hufford, The Sagamore Journal, Lars Plougmann, joiseyshowaa, radiant guy, cliff1066™, Congressman George Miller, post406, Tambako the Jaguar, Fifth World Art, heipei, stan.faryna, Red Barnes, marshalltownpubliclibrary, NASA Goddard Photo and Video, Scott & Elaine van der Chijs, Raúl A., Scott & Elaine van der Chijs, ConspiracyofHappiness, maz hewitt, seannaber, Zion PhotoGráfico, Casey David, Eli Hodapp, roberthuffstutter, seannaber, yaquina, Vladimir Yaitskiy, CIAT International Center for Tropical Agriculture, mark sebastian, Marxchivist, aNgeLinRicHmoNd, MPD01605, steven.y, R/DV/RS, erix!, Ernst Vikne, katmeresin, Gage Skidmore, Poetprince, rawmustard, Svadilfari, Sweet One, George Vnoucek, cambodia4kidsorg, markn3tel, UggBoy♥UggGirl [ PHOTO // WORLD // TRAVEL ], Marion Doss, Korean Resource Center 민족학교, Octavian Cosma, lilivanili, krossbow, DonkeyHotey, LizMarie_AK, Matt From London, Vote Marc Moffitt, soundfromwayout, comedy_nose, Worldizen, phileole, Siena College, thivierr, edalisse, Muffet, r w h, betancourt, Obama-Biden Transition Project, MelvinSchlubman, L.C.Nøttaasen, vicki moore, North Charleston, stephane333, srslyguys, acornchief, 28misguidedsouls, Peter McCarthy, Lucid Nightmare, AlicePopkorn, C_Baltrusch, Alex E. Proimos, Robby van Moor, Bengt Nyman, Loren Javier, dfred, Wendy Piersall, dgj103, stevegatto2, Mitya Kuznetsov, Ivy Dawned, gregwest98, Chris_Short, Bob Jagendorf, B Mully, Palinopsia_Films, Thriving Ink, jvoves, spakattacks, technoevangelist, CJ Sorg, h4ck3rm1k3, DonkeyHotey, U.S. Fish and Wildlife Service - Midwest Region, kerryvaughan, Minette Layne, Matt Neale, roberthuffstutter, Muslimology, Tony the Misfit, jamiejohndavies, Fibonacci Blue, S.MiRK, Јerry, adria.richards, archer10 (Dennis) Busy, LenDog64, billaday, Lazurite, pablo.sanchez, saccodent, Elvert Barnes, Lida Rose, avlxyz, arneboell, Valerie Everett, @ANDYwithCAMERA, istolethetv, MPD01605, deeleea, markwainwright, Kevin Goebel, TrishaLyn, ellenkabellen, Krysten_N, jurvetson, Minnesota Historical Society, showbizsuperstar, brainchildvn