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US Federal Reserve Data On Loans During Crisis Released
oDDmON oUT writes "Pursuant to a FOIA request, Bloomberg has acquired numbers from the Fed on loans made to banks and businesses during the financial crisis between 2007 and 2009. They also posted a direct link to the spreadsheets in zipped format and updated their data visualization of the lending."
It’s one thing to say that the Federal Reserve is an independent institution. It’s another thing to say that it can keep us all in the dark.
In other words, they take these low interest loans and buy treasury notes with them. All the interest they earn from the Treasury Department ends up being their profit.
This is nothing more than common theft really.
Individuals often are wanting handouts, not loans.
Honk! bullshit! I'm an individual. I'd go for a no interest loan any time. Are you offering?
There is a lot of difference between a loan and a handout.
Honk! bullshit! The difference is in name only. They both save you money.
The only difference between the banks and individuals is that rich powerful people run the banks, so they got the freebie loans.
...than the banks. Looks like only about $100 billion not paid back by banks, but the two government sponsored organizations are expected to have losses approaching $300 billion. SEC is now suing the former CEO's for fraud.
After this and other "bombshell" revelations by Bloomberg this year, they are apparently the only financial news organization worth its salt in the US. Kudos to them, and shame on everyone else (WSJ, FT, Economist, etc etc).
In Soviet Russia, articles before post read *you*!
It's very simple. When you see the number `4`, a pony is killed. A `7' means they are all out of red paint, come back Tuesday. A `2` means water fountain. And so on and so forth.
rewriting history since 2109
We don't need our deposits protected.
The FDIC already had that covered and actually makes banks LESS in need of protection, since their most important creditors, the american people who have deposits with them, can't get shafted if the bank goes bankrupt.
Just let the banks fail already. Having the FDIC cover deposits is all the bailout we need.
I like how this got promoted to level 5 even though anyone who has taken a brief course in remedial business knows that the FDIC does NOT guarantee insurance on all funds, and for those funds, it is only insured up to 100,000$.
Have fun getting only 100k or less of your retirement account back :)
GG, better start reading other blogs
Your deposits are perfectly safe because they don't really exist. They could burn your dollars on deposit and print you new ones on withdrawal. To you it's precious acquired wealth - tokens representing the sweat of your brow, the profits of careful negotiation. To them, it's just not.
Help stamp out iliturcy.
The FDIC limit was bumped to $250,000 in 2008. SIPC insures $500,000 of security investments.
Do you even lift?
These aren't the 'roids you're looking for.
The magnitude of the losses would have been such that the FDIC fund would have been sucked dry in a heartbeat. Then it would be up to the U.S. Government to make up the shortfall, piling the new government debt on to the national debt pile. Haven't we been doing enough to "pile on" already?
Also, there's a lot of "interconnected-ness" in the banking industry. If one large bank fails, it will drag another handful with it. They will drag others with them, etc. Only "smallish" banks can fail and have the system absorb the impact without massive "domino effect" collapse. "Too big to fail" is a sobering thought...
All these banks have very large US operations, and their branches in US are essentially US banks. What puzzles me is that our friendly makers of luxury sports cars from Bayerische Motoren Werke AG (aka BMW), for some reason got upwards of $4B. Admittedly they have a finance branch, but I thought the idea was to save a couple of critical banks not profitable car makers.
http://www.yale.edu/law/leo/052005/papers/Warren.pdf
From a very general view, banks manage cash flows. There are in flows and out flows from both loans, deposits and various instruments. There is never a one to one match between the in flows and the out flows and there are gaps in both time and nominal amounts. The banks manage these gaps by keeping a liquidity buffer by borrowing and lending from/to each other. Banks make money by making sure their inflows are greater than their outflows. For example, a very simple way is to lend money with long maturity (high interest) and borrow money with short or no maturity (deposits, low interest).
In a liquidity crisis like the one we had, the inter bank borrowing and lending stops dead because no one knows who's gonna go bust next. So, even if a bank has solid finances with 100 billion of loans maturing next month they may still go bust if a client wants to withdraw 50 bucks and they simply don't have the cash today. That's why the government stepped in, to provide liquidity when no one else dared to (it was one of the official reasons anyway).
This is also why they lent money to foreign banks. They had obligations in dollars and couldn't get dollars any other way. I'm not an expert on this large scale banking stuff but I was quite surprised to see RBS as number 4 on that list.
The thing is, the Constitution delegated to Congress the rights to "coin money" for a reason. They have interpreted that instead as a right to delegate the right to print currency, and delegated said right to the Federal Reserve so they dont have to waste time actually doing their jobs. And every time the Fed turns on the printing press, by diluting the pool of currency, it's the same effect as milling coins or flat-out counterfeiting really - it's a hidden, involuntary tax. We all pay the bill through inflation and reduction in value of our savings and retirement. That makes it the people's money just the same if it were revenue taxed openly.
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Friends don't let friends enable ecmascript.
This is an important point. One of the biggest economic phenomena in history, the US housing bubble, was not even acknowledged by prominent economists, government or private. They solemnly intoned such a thing didn't exist and all was well. Economics remains firmly a social science. A worthwhile field of study, but not subject to scientific rigor and generally not yielding testable hypotheses.
Many say the massive stimulus (deficit spending) saved the world economy. It's an unfalsifiable assertion.
The Economist magazine had a most interesting discussion on the similarities between the 1930s and today, with a discussion of the responses.
The politicians wanted to "calm down" the markets so things would get back to normal. The loans were not that short (1+ years as far as I remember) because they wanted to "show strong, long term support". Banks have rather long mismatches in their balance sheets (like 30 year house loans but no 30 year deposits) which usually isn't a problem as long as the flow of new loans/deposits is more or less predictable over time. If the government had provided only short loans, the market would not know how long the banks would survive since the gov't could change its mind any day. The government had to provide loans that were long and large enough to make the market believe the banks would survive the crisis.
Also, many banks were in really deep shit. Asking for a large interest could have caused a couple more defaults and thus added to the mess. Yes, it was a donation to the financial industry but the fear of the alternative (a long and deep liquidity crisis) was real. The liquidity crisis was rather short lived though so that actually worked out well. We still have a crisis but not a liquidity crisis. The real crisis is about bad debts all over the world. That has not been resolved yet.
This is based on what I remember from the news and discussions back then so it may require a grain of salt or two. I'm sorry for sounding like a politician/banker. I don't exactly buy all the crap above but I do understand some of the reasoning behind it.
Wrong. They have a massive factory in Greenville-Spartanburg South Carolina.
"Too big to fail" is a sobering thought...
Which is why one iether does not let them get too big or restricts them so that they cannot engage in practices and businesses likely to make the fail. The fact that we spent the last twenty or so years removing these constraints were at the root of this particular downturn. The fact that this problem has not been addressed as a result is our shame.
That is all.