Posted on 12/05/2010 8:47:58 AM PST by null and void
In the depths of the financial collapse, the U.S. Federal Reserve pumped $3.3 trillion into keeping credit moving through the economy. It eventually lent $57.9 billion to the auto industry — including $26.8 billion to Ford, Toyota and BMW.
The Fed on Wednesday was forced to reveal the identity of the companies it aided during the crisis, after contending to Congress that keeping their identities and the details of such lending secret was essential. Much of Wall Street, and corporate giants such as General Electric, Harley Davidson and McDonald's, took advantage of the Fed's help. We've done the math on how the Fed propped up the auto industry.
While Chrysler and General Motors had to go to Congress to beg for cash in 2008, every other automaker's finance arm was having trouble as well. Typically, once they lend money to a buyer, they sell the loan, get the cash upfront, then pump the proceeds back into the business. They also take out short-term loans called commercial paper that keeps the day-to-day business afloat. The crash cut the circuit, raising the chances the automakers couldn't make loans to buyers and keep selling new vehicles.
That's where the Fed stepped in. In normal circumstances, the Fed only lends money to banks, leaving the decisions about who should get credit to them. But when the financial markets started to collapse in late 2008, the Fed set up several programs to lend money directly to corporations, a highly unusual step.
According to the data, from October 2008 through June 2009 the fed bought $45.1 billion in commercial paper from the credit arms of four automakers - Ford, BMW, Chrysler and Toyota - along with GMAC (the former General Motors credit arm). Of those, Ford sold the most, with $15.9 billion.
The Fed also lent $13 billion to investors who bought bonds backed by loans to new car buyers from automakers and banks. The Fed made clear that while investors got the loans, the move was meant to keep the lenders in business; the credit arms of Ford, Chrysler, Nissan, Volkswagen, Honda and Hyundai all benefited directly.
Ford spokeswoman Christin Baker said the two programs "addressed systemic failure in the credit markets, and that neither program was designed for a particular company, or even a particular industry." Ford Credit has disclosed through SEC filings and conference calls with media and investors that it was taking part in both programs.
BMW told Bloomberg that the Fed lending "supported our financial profile and offered us an additional funding source, especially at times when the money markets and capital markets did not function properly and efficiently."
According to the Fed, the commercial paper loans have been paid in full, while some $2 billion remains outstanding on loans for bond investors.
The secrecy surrounding the details of the loans only masked how much aid corporate America and Wall Street needed. While General Motors and Chrysler took the brunt of the blowback for relying on government handouts, the reveal of the Fed numbers show that a far bigger slice of the U.S. auto industry needed help.
And new businesses would rise out of the ashes. The government has too much vested in who wins and who loses in the market.
This will wind up like the FR retail boycott list
We got down to the St. Vincent de Paul thrift shop as the only "acceptable" store, and then an anti-Catholic screed crossed them off the list.
The TARP money (taxpayer funded) was what GM and Chrysler took and we'll end up losing money on that "bailout".
The commercial paper market totally froze up during the crisis. The Credit division of Ford wouldn't have been able to finance any loans without commercial paper.
The loans were all short term and have been fully repaid. We made money.
The TARP loans to GM, GMAC and Chrysler have not and never will be fully repaid. The bond holders in GM and Chrysler got screwed and the unions will end up keeping our tax dollars.
That didn't happen with Ford.
Perhaps you are unaware of the millions, yes, millions, of employees work for companies in the Fortune 100, and how many decades it took for those companies to be built.
It would have been utterly irresponsible and caused far greater damage to the US and global economy not to have kept the money markets flowing.
Just because the details weren’t released at the time doesn’t necessarily make it some nefarious secret. One story I read showed the Ford reported its participation in its public filings to the SEC. That doesn’t sound very secret, does it?
This cannot be justified, until it is thoroughly looked into, which I have been assured that it will be.
Congress better have a real thick pad of subpoenas ready. which I am sure they do, because they are going to need it.
My BS antenna is at full mast on this.
Leni
Bump
Caterpillar just bought Bucyrus in Milwaukee. Does the Govt. give stimulus money to someone to purchase another company that is operating just fine with no danger in sight of closing?
I hear you. I'm in the same boat and paddling hard.
Our small community bank got stimulus money. I asked the bank manager why they got stimulus dollars and she told me it was so they could buy another bank.
Didn’t make sense then and doesn’t make sense now. They did not seek the money in the first place.
My guess is that the money had strings attached. What they were is any one’s guess.
NONE of this was that secretive. Many companies openly spoke of their use of these loans when they took them
Nope...
Pretty much every automaker with a credit arm took these loans.
Reuters reported nearly 18 months ago that Honda took $1.5 billion in loans from the Fed under this program (http://www.reuters.com/article/idUSTRE55T4P520090630).
Honda simply isn’t on the graph because they weren’t one of the largest users of the loan facility.
On the positive side, these loans were short term and have all been paid back.
As I posted, Honda took loans, too:
http://www.reuters.com/article/idUSTRE55T4P520090630
These loans have been repaid.
For example, if you look at the Fed’s records for Commercial Paper Purchases, they bought the following commercial paper issued by Ford Motor Credit. I’m listing the purchase date, the amount, and the maturity date, in order:
10/27/2008: $1,980.4 million : 1/26/2009
10/29/2008: $990.4 million : 1/27/2009
10/31/2008: $991.0 million : 1/29/2009
12/18/2008: $1,448.0 million : 3/18/2009
12/18/2008: $496.0 million : 3/18/2009
12/19/2008: $992.0 million : 3/19/2009
1/29/2009 : $1,487.9 million : 4/29/2009
2/13/2009 : $495.9 million : 5/14/2009
3/2/2009 : $1,984.1 million : 5/29/2009
3/18/2009 : $1,487.9 million : 6/16/2009
3/18/2009 : $496.0 million : 6/16/2009
3/19/2009 : $992.0 million : 6/17/2009
5/19/2009 : $992.0 million : 8/17/2009
6/17/2009 : $992.0 million : 9/15/2009
So all the loans matured and were paid back by 9/15/2009 in Ford’s case, with no more than $6.943 billion ever outstanding.
“According to the Fed, the commercial paper loans have been paid in full”
Not only paid in full, but paid with interest. If you look at the loans Ford placed through the Commercial Paper Funding Facility, you’ll see that they paid a weighted average of 3.37% APY, and all of them were 3 month loans. That’s a pretty darn good 3 month apy nowadays.
Net, the Fed made $133.5 million in profit by loaning that money to Ford...
The chart is extremely misleading, as the loans were 3 month loans and many were paid off before others were taken out, so the maximum ever outstanding can be dramatically different than the total that this story charts.
For example, Ford took out a bunch of loans and kept rolling them over, so the maximum they ever had outstanding was $6.943 billion. Toyota took out theirs almost all at once, borrowing all but $2 million during the period of 1/27/09-1/30/09, and their maximum outstanding was $4.624 billion.
Yeah, the taxpayers got screwed again/ economic ignorance off
ping
We have all been duped since before our birth. The Fed is using US credit to buy up the world and enslave us by charging us rediculous amounts (fake debt) for the privelage of printing our money. Get all the facts in this new book http://theonlyanswertotyranny.com/about-the-book/ It will blow your mind. Read about what really happened in 1933 when thsy took the US off the gold standard and stole your grandfathers wealth and what they have been doing since. It is not tin foil stuff. It is real. Check it out. It will blow your mind. Everyone needs to know this information so we can use it to get the US straightened out financially again. Do yourself and the US a favor and read this book.
The Fed gives more to the Treasury than the Fed earns on Treasury securities it holds.
Get all the facts
OMG! That's funny.
Do yourself and the US a favor and.....
Take an economics class, instead of reading stupid conspiracy books.
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