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Fed Audit's Initial Report Reveals Trillions in Secret Loans
An anonymous reader writes "The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression."
nuff said.
Its not some sort of secret, it has been disclosed by the Fed in their annual reports as required by law.
http://finance.fortune.cnn.com/2011/07/08/surprise-the-big-bad-bailout-is-paying-off/ Fortune Magazine Article
OK, so they loaned out a truly epic amount of money. A reasonable thing to do during a crisis: you borrow money to get through the bad times, then you pay it back when times are better.
The questions are:
* Did they pay it back?
* Did they pay interest?
* How much?
I don't really care about the absolute dollar figure: this was an international crisis and the dollar figures are going to be proportional to the size of economies, which will measure in the trillions. As long as the net result was that the economy survived (which it did), that it didn't blow up inflation rates (which it didn't; inflation was negative for a while), and that in the end the books balance (thus my questions).
It may well be that the interest rates were so low as to be questionable, especially given that the banks have been giving nonexistent interest to depositors and have been very chary about turning that money around to investment. But I'm not going to wring my hands over the size of it. I'm more concerned about the terms.
Stolen?
They made overnight loans on which the Fed profited. Meaning they reduced the amount the American people owe.
I thought this site explains what a trillion dollars is fairly well.
www.wtfnoway.com
It's not illegal if no one enforces the law against it.
Give me Classic Slashdot or give me death!
A) These are loans, almost all of which get paid back.
B) this is not a secret. Just because something goes on you didn't know about, doesn't mean it was a secret. It just means you where ignorant.
C) This benefits the US. The US MADE money from this.
I just had to get that out there, I know it wont stop the frothing lunatics.
The Kruger Dunning explains most post on
But Ron Paul does not advocate return to pure gold standard, he advocates allowing competing currencies, some backed by gold, other by silver, third by "trust in US Government", and letting people/markets decide which one do they prefer.
Because multiple competing currencies worked so great during the Articles of Confederation days, right? Oh wait, it was an abysmal failure.
As a poster suggested above, these were overnight loans that were almost immediately repaid.
Thats total, not at once. Lend out $100 Billion to someone on Monday night, they pay it back Tuesday morning, and borrow it again Tuesday night to pay back Wednesday morning. Do that for a week and you just lent out a Trillion.
seriously guys, this isn't news.
One of our competitors trademarked the term "hypothesis". From now on, we will call them "boneheaded ideas".
It's on page 131, table 8, bottom right:
In short, it's a pretty absurdly inflated number. Loaning 10 billion for 1 day, and doing it for 30 days, is counted as 300 billion of loans, rather than a 10 billion 30-day loan.
"Table 8 aggregates total dollar transaction amounts by adding the total dollar amount of all loans but does not adjust these amounts to reflect differences across programs in the term over which loans were outstanding. For example, an overnight PDCF loan of $10 billion that was renewed daily at the same level for 30
business days would result in an aggregate amount borrowed of $300 billion although the institution, in effect, borrowed only $10 billion over 30... In contrast, a TAF loan of $10 billion extended over a 1-month period would appear as $10 billion. As a result, the total transaction amounts shown in table 8 for PDCF are not directly comparable to the total transaction amounts shown for TAF and other programs that made loans for periods longer than overnight"
Further, this is pretty much regular operations of the Fed as part of their work in stabilizing the economy through monetary policy. It's what they were made to do.
The GAO is pointing out failures in controls. Offering some perspective as a public company auditor (not a government auditor) I see failures in control all over because there is the concept of an ideal control environment, but every control represents additional costs and times, and general inefficiency. It adds hoops to jump through to get things done. At some point companies look at the risk and the cost needed to implement additional controls on that risk and decide that it's not worth it to strive for 100% security against a problem that may or may not exist. However, auditors point out these risks because that's their job, and the risks are real, whether or not the cost/benefit makes sense. In this specific case, revolving around conflicts of interest, there's only so much you can do, but considering the nature of the issue, it is damned important to have strong controls in these area. In summary, it's not suprising to see control deficiencies, and control deficiencies are not evidence of fraud or misstatement, but it's always better to have less control risk.
Got news for you, before WWII, our solders pointed broomsticks at cars ("tanks") and said, "eh, eh, eh, eh, eh, eh", to simulate firing an imaginary weapon. During WWI, gunners trained by using their finger and pointing at imaginary targets while spinning in a swivel chair. The US absolutely did NOT become a super power until after the close of WWII. And in large part, that was thanks to the Germans (including Nazis) absorbed by the US.
At the Battle of Leyte Gulf, we had forty aircraft carriers: 8 fleet, 8 light, and 18 escort. Plus a dozen battleships and over a hundred fifty other ships.
Forty fucking aircraft carriers.
We were a super power--and the only nuclear power--before the end of World War 2.
-- IANAL, this isn't legal advice, and definitely isn't legal advice for you. Also, Squee!
Since December 23, 1913: