Fed Gave Banks Eye-Popping Emergency Loans, Without Telling Congress

An anonymous reader writes with this excerpt: "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."

Comments

Capitalism privatises the losses too

[Colin Smith]

What you know, isn't capitalism. Hasn't been for quite a while.

World's dumbest loanshark

[John3]

Jon Stewart covered this topic quite well the other day. So essentially we (US Treasury) loaned the banks money at 0.01% and then they loaned us (US Treasury) the money back at a higher rate. WTF?

OT: LOL!!!

[Anonymous Coward]

Can somebody with a little credibility submit this story...

http://www.nytimes.com/2011/12/03/us/officers-punished-for-supporting-eased-drug-laws.html ...an officer fired for answering a wildcard question.

Have you seen who Obama's advisors are?

[Colin Smith]

Seriously...
Do a little graph of where they previously worked. Highly interesting.

Old boy's club owns America. Oh and Greece, Italy, ECB etc etc.

Re:Capitalism

[istartedi]

You sort of beat me to it, but I think the best word for what we have is simply cronyism. That gets you down to one -ism that describes it all. It applies mostly to corporations, but if you use the word cronymism it covers union corruption too. Anybody who opposes cronyism should be just as upset about the way bondholders were screwed in favor of unions during the GM bankruptcy as they are about the way banks are profiting.

Gee...The Daily Show? Wrong? Why I never!

[RobinEggs]

For some reason I trust the Daily Show for more accurate news then real news outlets...

And the mystery of America's dysfunction deepens.

If you don't trust any of the 'real' news outlets then go do some research and figure out a bit of the truth yourself, or start finding trustworthy alternative papers and check their sources. Or don't bother with news at all.

The Daily Show is an entertainment product; just because it has a little news (and a big helping of insouciant liberal sarcasm) doesn't mean it's acceptable as a primary source of information. I'd rather watch the Daily Show than Nancy Grace or Glenn Beck, and I know the Daily Show will contain more true statements and fewer lies, but it's still not real news. It's something you watch after you figure out the real news, for some black comedy and hyperbole about how much the world sucks.

People who depend primarily on the Daily Show are better than people who depend primarily on Fox News, but not a lot.

Re:Basic macroeconomics

[John3]

--soapbox--

I'm speaking strictly from personal experience with my small business (hardware store employing 30 people) and what I hear from other small business owners both locally and in the hardware industry around the country, but the banks don't appear to be loaning anyone anything lately. Even with the Fed pumping money into the system they still aren't willing to loan it out to small businesses or individuals. Money is going to money, and that's doing nothing to help the businesses and individuals that are struggling.

--end-soapbox--

Re:Huh? [Re:Is that all?]

[Runaway1956]

I'm a bit curious. Where do the prison systems fit in there? The nation which imprisons a greater percentage of it's population than any other nation has to budget for it somehow. Does that come under "Defense and wars", since it's mostly due to the "War on Drugs"? Or, would it come under "Social Security", since society is just taking care of a (huge) undesirable element (namely, dopeheads)? Or, maybe it comes under Federal Pensions. A guy can live a life of crime, then retire to prison, where the government will see to his needs as he ages.

Re:just like communism...

[Required Snark]

You raise a very interesting point. I have observed that the Russia (the former Soviet Union) and the USA have followed a similar course since the fall of the Eastern Bloc. Both systems have been taken over by corrupt and inefficient economic elites. The difference is that in Russia they admit what has happened, and explicitly refer to the "plutocrats" when talking about their economic situation. In the USA no one has admitted that our economy is run by a clique of incompetent self serving thieves that are enriching themselves at the expense of the US and world economy. Only with the emergence of the Occupy Wall Street movement has there been any public discourse about how intrinsically corrupt our economy has become.

Here is an interesting post on Reddit from someone inside the hedge fund industry about how the game is really rigged. It's an insiders view of how a segment of the corrupt economic system runs.

Furthermore, you have absolutely no chance in terms of access to the best services. Hedge funds have a direct line to investment bank's institutional brokerage teams - these are the guys that spend day and night sucking up to hedge funds, trying to get them the best deals at the cheapest rates. This means that while you're buying stocks and bonds, hedge funds are getting special rights, warrants, sweetheart deals, private placement deals, options, bigger discounts on bonds, and much better bulk commission rates and lower spreads on stocks. If you're paying 4.25$ for a 4.15$ stock, they are paying something like 4.16$. And they are eating alive your profits because when the stock goes up to $4.30, they can activate another warrant to purchase 20m shares at $4.25, diluting the value of your shares.

Next, you lack information and exposure. You have no idea what is going on in the market besides what you see on the news - while hedge funds have analysts working around the clock and a bunch of service providers who give minute-by-minute analysis of their portfolio opportunities and weaknesses in all markets with exposures to nearly everything. Meaning, if there is an opportunity in the real estate market (i.e. legislation), it might take you weeks to get in - hedge funds will have gotten in the minute the legislation was passed. Furthermore, when IPOs come out for companies, hedge funds get top billing on the primary market shares - which means investment banks are selling directly to them. Once the secondary market becomes available, hedge funds are up 15-20% on these investments, sometimes within hours.

Finally, you have no capital compared to these hedge funds. The people who invest in these hedge funds are not just the 1%, they are the 0.1%. These are the guys with 500million dollar bank accounts and the ability to do whatever the fuck they want. Hedge funds know this, and they invest without having to care about whether their clients can pay the rent or send their kids to college. All of that is irrelevant. Their sole purpose is to earn money, not to mitigate risk.

http://www.reddit.com/r/occupywallstreet/comments/muqzv/wall_of_text_i_work_in_wall_street_and_work_in

Re:Between presidents

[WOOFYGOOFY]

And is your population isn't stable or growing then the money you made off the times it was would go a long long way to patching you over when it's not. That is, if you don't raid it. And if finally there IS any negative difference between needed and on hand, then you raise taxes to pay for that difference because THIS IS WHAT CIVILIZATION IS- not telling the poor and old and inform-"tough luck- you're on your own and thanks for all your hard work and law abiding contributions to society". If you want THAT kind of "civilization", I have a one way ticket to Somalia for you.

Re:Horray for the Fed!

[JesseMcDonald]

The problem is that if the banks were allowed to fail on their own, not only would the investors of those banks be (rightly) wiped out, but the collateral damage would have been tragic.... Runs on ALL the banks, savings and investments wiped out, massive, depression-style unemployment.

That's the risk you run by doing business with banks known to run the fractional-reserve scam, simultaneously promising immediate access to deposits and lending them out to other customers. When a bank fails, not only is the bank (rightly) wiped out, but so are (rightly) those who deposited their funds into those banks knowing that they wouldn't be held in reserve, that they may not be there on demand in the event of a run on the bank, or perhaps ever if enough of those loans happen to default.

Those who knew better than to trust fractional-reserve banks with their money will be in a relatively good position to buy up foreclosed assets and businesses, extend loans at profitable rates, and, more generally, to begin the recovery process. I'm not saying that the failure is a good thing, but anyone able to overlook the growing risk of fractional reserves must be economically blind. This disaster has been a long time coming, and it's not because the banks were "too big to fail" or "not regulated enough", it's because they were legally permitted to commit outright fraud on a grand scale, aided and abetted by the Federal Reserve.