Wall Street Bailout: Fed's 1.2 Trillion Secret Loans Revealed

Catching up on my news reading on a Sunday afternoon, at the topÂ*of theÂ*Bloomberg homepage was an investigative piece finally revealing how much, when and whom the Federal Reserve provided the discount window and emergency lending facilities to from August 2007 through April 2010. The loans were intended to bridge the liquidity crunch and maintain the credit market during the 2008 financial crisis. Based on Bloomberg's account, the Federal Reserve provided to the "Wall Street Elite" as much as 1.2 trillion in public money to banks and other companies from August 2007 through April 2010. Â*And remember this isÂ*on top of the 700-billion TARP program fromÂ*the U.S. Treasury Dept., which is also funded by the public. The graph below from Blooomberg includes the top 10 who's-who-on-Wall-Street recipients of Fed's loan, while the interactive detail is available here. "The Wall Street Elite" -Â*Not Above BorrowingÂ* Many of these borrower-banks had reported record profits prior the 2008 <a href="http://www.uggsbootsforcheaponline.com/ultra-tall-5245-c-250.html"><strong>ugg boots classic</strong></a> financial crisis and have sugar-coated their "involvement" with the government bailout in their shareholder and press releases post-crisis. While Morgan Stanley tops the list with a peak loan of 107 billion, Citigroup debt to the Fed peaked at 99.5 billion, while BofA also had to borrow 91.4 billion. Â*Goldman Sachs, which became the most profitable securities firm in Wall Street history in 2007, borrowed 69 billion from the Fed on Dec. 31, 2008. Mum's The Word Our last article--Wall Street Bailout: Too Big To Collect?--cited anotherÂ*analysis by the Center for Media and Democracy (CMD)Â*thatÂ*4.8 trillionÂ*has gone out of the door to bail out Wall Street, including "loans with below-market interest rates and for questionable collateral to banks directly from the Treasury and Federal Reserve." However, the full information regarding Fed's loans to banks has remained secret as the Fed was fighting to withhold the information. Some banks, such as London-based Barclays Plc borrowed 64.9 billion and Frankfurt-based Deutsche Bank AG got 66 billion, tapped the Fed through programs that promised confidentiality. European Banks Dipping In Bloomberg has obtained data through the Freedom of Information Act, and litigation, and found that: "Almost half of the Fed's top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took 84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got 77.2 billion. Germany's Hypo Real Estate Holding AG borrowed 28.7 billion, an average of 21 million for each of its 1,366 employees."The largest borrowers also included Dexia SA, Belgium's biggest bank by assets, and Societe Generale SA, France's second largest bank, whose stock price plunged 15% on Aug. 10 as investors speculate the contagion of European sovereign debt crisis may spread to France despite that France's AAA top credit rating was affirmed by all three major rating agencies (???Question mark here in the context of the recent U.S. downgrade by the S&amp;P). According to Bloomberg, there wereÂ*more than 21,000 transactionsÂ*between the Fed and various banking institutes. Â*The <a href="http://www.canadagoosparka-discount.com/canada-goose-mens-parka-canada-goose-yorkville-parka-c-2_5.html"><strong>canada goose down parka</strong></a> combined outstanding balance under the seven programs reviewed by BloombergÂ*peaked at 1.2 trillion on Dec. 5, 2008, more than 25 times the Fed's pre-crisis lending peak of 46 billion on Sept. 12, 2011, the day after the 9/11. "A Wall of Maturing Debt" The scary thing is that according the Global Financial Stability Report issued by the IMF in April, theÂ*aggregate balance sheets of global banks, particularly banks in Europe (AmericanÂ*banks have their own problems withÂ*a huge shadow housing inventory to write off), still remain leveraged and reliant on the wholesale funding, including central banks liquidity support: "The result is that global banks face a wall ofÂ*maturing debt, with 3.6 trillion due to mature overÂ*the next two years."Â* "A number of banks in Europe—including nearly all banks in Greece, Ireland, Portugal, many of the small and mid-size Spanish cajas, and some German Landesbanken—have lost cost-effective access to term funding markets."? Chart Source: IMF ? Chart Source: IMF Bailed-out Once Shame on You The U.S. Federal Reserve already bailed outÂ*banksÂ*on both sides of the Atlantic OceanÂ*once, and may have been an unwilling participant in driving up inflation and commodity prices as banks borrow from the cheapest source, but instead of lending to ease the tight credit market, banks use the moneyÂ*to speculate in commodity markets to maximize profits. Â*And things in the banking sector have not improved much since thee bailout mostly due to the lack of a comprehensive set of globally accepted and implemented policies to address banking system vulnerabilities. In light of the ongoing sovereign debt crisis and rising bond spreads n the Euro zone, and since the value of bank exposures to troubled sovereigns is uncertain, which is something investors increasingly have very littleÂ*appetite for, it is quite possible thatÂ*a similar banking <a href="http://www.cheapnorthface-outlets.com/north-face-down-jackets-men-black-p-5740.html"><strong>north face coats</strong></a> and liquidity crisis contagion could erupt again, which would require central banks including the Federal Reserve acting again as the ultimate go-to bailout guy. Â*By then, I think moral hazard would be the least of the problems. Â* Â*