Have You Heard About The $16T Bailout The Federal Reserve Handed To The Too Big To Fail Banks?

The Economic Collapse ^ | 12/01/2011 | Michael Snyder

[SeekAndFind]

What you are about to read should absolutely astound you. During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret. Do you remember the TARP bailout? The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the "too big to fail" banks. Well, that bailout was pocket change compared to what the Federal Reserve did. As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars in nearly interest-free money to the "too big to fail" banks between 2007 and 2010. So have you heard about this on the nightly news? Probably not. Lately Bloomberg has been reporting on some of this, but even they are not giving people the whole picture. The American people need to be told about this 16 trillion dollar bailout, because it is a perfect example of why the Federal Reserve needs to be shut down. The Federal Reserve has been actively picking "winners" and "losers" in the financial system, and it turns out that the "friends" of the Fed always get bailed out and always end up among the "winners". This is not how a free market system is supposed to work.

According to the limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the grand total of all the secret bailouts conducted by the Federal Reserve during the last financial crisis comes to a whopping $16.1 trillion.

That is an astonishing amount of money.

Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.

The total U.S. national debt is only a bit above 15 trillion dollars right now.

So 16 trillion dollars is an almost inconceivable amount of money.

But some other dollar figures have been thrown around lately regarding these secret Federal Reserve bailouts. Let's take a look at them and see what they mean.

$1.2 Trillion

A recent Bloomberg article made the following statement....

The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The $1.2 trillion figure represents the peak outstanding balance on these loans, not the total amount of all the loans. On December 5, 2008 the "too big to fail" banks owed this much money to the Federal Reserve. Many of them could not pay these short-term loans back right away and had to keep rolling them over time after time. Each time a short-term loan got rolled over that represented a new loan.

$7.7 Trillion

Bloomberg is reporting that the Federal Reserve had made a total of $7.77 trillion in financial commitments to the big banks by the end of March 2009....

Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

But as mentioned above, a one-time limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act covered an even broader time period and revealed even more bailout loans.

According to the GAO audit, $16.1 trillion in secret loans were made by the Federal Reserve between December 1, 2007 and July 21, 2010. The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report....

Citigroup - $2.513 trillion
Morgan Stanley - $2.041 trillion
Merrill Lynch - $1.949 trillion
Bank of America - $1.344 trillion
Barclays PLC - $868 billion
Bear Sterns - $853 billion
Goldman Sachs - $814 billion
Royal Bank of Scotland - $541 billion
JP Morgan Chase - $391 billion
Deutsche Bank - $354 billion
UBS - $287 billion
Credit Suisse - $262 billion
Lehman Brothers - $183 billion
Bank of Scotland - $181 billion
BNP Paribas - $175 billion
Wells Fargo - $159 billion
Dexia - $159 billion
Wachovia - $142 billion
Dresdner Bank - $135 billion
Societe Generale - $124 billion
"All Other Borrowers" - $2.639 trillion

This report was made available to all the members of Congress, but most of them have been totally silent about it. One of the only members of Congress that has said something has been U.S. Senator Bernie Sanders.

The following is an excerpt from a statement about this audit that was taken from the official website of Senator Sanders....

"As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world"

So where is everyone else?

Why aren't leading Republicans and leading Democrats crying bloody murder over this report?

This scandal should have been front page news for months when it was revealed.

But it wasn't.

And Guess what?

Not only did the Federal Reserve give 16.1 trillion dollars in nearly interest-free loans to the "too big to fail" banks, the Fed also paid them over 600 million dollars to help run the emergency lending program. According to the GAO, the Federal Reserve shelled out an astounding $659.4 million in "fees" to the very financial institutions which caused the financial crisis in the first place.

In addition, it turns out that trillions of dollars of this bailout money actually went overseas. According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia.

So why were our dollars being used to bail out foreign banks while tens of millions of American families were deeply suffering?

That is a very good question.

Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.

According to a recent Bloomberg article, the big banks brought in an estimated $13 billion by taking advantage of the Fed’s below-market rates....

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

So once the financial crisis was over, were adjustments made to the financial system to make sure that this type of thing would never happen again?

Of course not.

Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

So now they are more "too big to fail" than ever.

But this is what happens when we allow unelected central bank bureaucrats to run our financial system.

Most Americans do not realize this, but the truth is that the Federal Reserve is not part of the government. In fact, it is about as "federal" as Federal Express is. The Federal Reserve has admitted that they are a privately owned institution in court many times, and you can see video of a Federal Reserve employee admitting that the Federal Reserve is privately owned right here.

The Federal Reserve is an out of control monster that is throwing around trillions of dollars whenever it wants to. Nobody should be allowed to do this. Nobody should be allowed to give bailouts to banks and corporations without the express permission of the U.S. Congress and the president of the United States.

This is a point that I made in my article yesterday. The Federal Reserve decided this week that it is going to provide "liquidity support" to Europe. If the American people do not like this move, that is just too bad. We do not get a say in the matter.

Are you starting to understand why I keep pushing the idea that it is time to shut down the Federal Reserve?

Please share this information about the secret 16 trillion dollar Federal Reserve bailout with your family and your friends.

If we can get enough people to wake up, perhaps there is still time to change the direction that this country is headed.

[Razzz42]

You are so off the mark it isn’t even funny.

Countries can’t buy....say commodities like oil without first converting their currencies to dollars before buying.

There are black markets and other agreements between BRIC countries who try to trade amongst themselves but the reserve currency is the US dollar for the large majority of all trading between countries. There is a reserve currency for a reason, so each floating currency rate (of different countries) can be converted to known dollar values making for a smooth and open transaction on a worldwide basis.

[Toddsterpatriot]

You have got to be kidding me.

No. Not even a little.

It says, before all the listed banks including the foreign ones receiving bailout monies, that money was lent out under “Broad-Based Emergency Programs” (12/2007 through 7/2010). The dollar amounts are in Billions.

Did you even bother to read my post? TARP, through the Treasury, lent taxpayer funds to US banks.

The Federal Reserve, using money they created from thin air (not taxpayer funds), lent to US banks AND foreign banks that had American subsidiaries.

The Fed did liquidity swaps with other central banks.

If you don't understand any of those terms, or the differences between the entities involved, you'll continue to post bad info.

You are quoting some fantasy guidelines usurped by TARP..... It took a FOIA lawsuit by a newspaper and others to get the Federal Reserve to release these figures.

See, you're mixing up TARP and the Fed.

Let me know if I can clarify it anymore for you. Always glad to help.

[Razzz42]

I see in your mind everything is above board and transparent with no sleight of hand involved, just a prefect financial machine at work.

(So far) Before any lending of monies, they are sterilized through the Federal Reserve. Treasury tell the Federal Reserve what they want and the Treasury gets it. The fall guy is the Federal Reserve. If the Treasury or the President’s Plunge Protection Team is causing buying into the stock market or doing direct loans with foreign governments or having the Bank of Japan buy dollars, you will never know or understand how this banking system is manipulated.

Show me and explain where the SWAPs occurred that cover the entire amount of money forwarded to foreign banks listed in the table on page 131, I’ll be waiting. I’ll give you a clue...TARP overruled the Federal Reserve’s normal procedures. That is what the report is about and that is what you can’t comprehend.

[DannyTN]

Oil is just one commodity out of many. And again there is no requirement that producing countries trade in dollars. Except that the producing countries choose to only sell for dollars. They choose to, because the dollar is more stable.

Iraq used to accept Euros. Iran will take any currency. Venezuela will take other currencies. I bet Libya would have taken any currency. And contrary to the gloom and doom of the reserve currency phobics, it won’t be a disaster even if they somehow all abandoned the dollar at once, which is very unlikely. It will be a very slow process if it happens at all.

[Razzz42]

It’s an international agreement a country has to sign on to to participate in commodity markets to purchase in US dollars.

The example of BRIC trading amongst themselves with barter or currencies of their choosing is a violation of trading agreements because undercutting prices to sell to one and not the other creates havoc and hostility between trading partners.

It is call the rule-of-law but if you don’t get it, I don’t know what to tell you.

[Toddsterpatriot]

I see in your mind everything is above board and transparent with no sleight of hand involved, just a prefect financial machine at work.

Why don't we correct your errors before you try to put words in my mouth?

Treasury tell the Federal Reserve what they want and the Treasury gets it.

Huh? Please explain what you mean.

If the Treasury or the President’s Plunge Protection Team is causing buying into the stock market or doing direct loans with foreign governments

The Treasury would need to get approval from Congress before loaning to a foreign government. Show me the vote that did whatever you think the Treasury was lending.

Show me and explain where the SWAPs occurred

Look on the Fed website. I gave you the link for the first week of swaps. Look week by week moving forward.

that cover the entire amount of money forwarded to foreign banks listed in the table on page 131,

Swaps are different than loans to banks.

I’ll give you a clue...TARP overruled the Federal Reserve’s normal procedures.

TARP was run by the Treasury. Stop giving me clues, it's clear you're short a few dozen.

That is what the report is about and that is what you can’t comprehend.

The report is about the Fed, not TARP. The Fed didn't do TARP.

[Toddsterpatriot]

It’s an international agreement a country has to sign on to to participate in commodity markets to purchase in US dollars.

Wow! That's funny.

[Razzz42]

I suggest you read up on international commodity markets and see what it takes to buy oil or wheat or minerals. It’s unbelievable the amount of US dollars changing hands every hour or minute for that matter...because the it’s the world’s reserve currency and dwarfs any other means being used such as black markets, gold, barter, etc.

[Toddsterpatriot]

I suggest you read up on international commodity markets

It would be quicker if you showed me the "international agreement a country has to sign on to to participate in commodity markets to purchase in US dollars".

Thanks!

[Razzz42]

When Congress passed TARP they gave Secretary of State Paulson carte blanche to spend the monies anyway he saw fit without being prosecuted for his decisions. Read the the bill/law. You should already know that was the core of the legislation. Paulson was responsible for giving loans to foreign banks because Congress and the President (signed) allow it with TARP.

On page 131 of this report they didn’t list the loans to the foreign banks in a SWAP Lines column. Read the table heading note.

Euro banks and the IMF don’t go begging to the Federal Reserve, just recently, they first go begging to US Treasury Secretary and/or President of the United States for funding then the Federal Reserve is instructed on what to do and what to accomplish albeit swap-lines, (at the time) buying crap paper (derivatives), direct loans, funding private businesses like AIG, anything that might threaten the downfall of world banking was supported by throwing money at it.

Congress has oversight of the Federal Reserve. The Federal Reserve can’t do whatever it wants. Needs to give notice to the US Treasury and US Treasury has to notify Congress. Both the Federal Reserve and US Treasury report to Congress during regularly scheduled hearings.

Again, after the 700 billion TARP was approved, then the US Treasury overruled the Federal Reserves guidelines and it was a money free for all, spending 16 trillion according to the GAO. Couldn’t have been done with the passage or TARP. Really has nothing to do with the Federal Reserve, the article is all about TARP, the Federal Reserve is just he fall guy. A GSE (Government Sponsored Enterprise) approved by Congress with jurisdiction and oversight.

You will need to read up on the President’s Plunge Protection Team that has authority to calm and stabilize the markets...http://www.answers.com/topic/working-group-on-financial-markets

[Toddsterpatriot]

When Congress passed TARP they gave Secretary of State Paulson carte blanche to spend the monies anyway he saw fit without being prosecuted for his decisions. Read the the bill/law. You should already know that was the core of the legislation.

You bet.

Paulson was responsible for giving loans to foreign banks because Congress and the President (signed) allow it with TARP.

No TARP loans went to foreign banks.

On page 131 of this report they didn’t list the loans to the foreign banks in a SWAP Lines column.

That's good, because Fed loans to foreign banks are different than Fed swaps with other central banks.

Congress has oversight of the Federal Reserve.

Congress can dissolve the Fed, change the Fed's mandate, do lots of things to the Fed, but they can't dictate what the Fed does day to day. Under current law.

The Federal Reserve can’t do whatever it wants.

Sure it can, as long as they follow current law.

Needs to give notice to the US Treasury and US Treasury has to notify Congress.

Interesting theory. Can you prove it?

Again, after the 700 billion TARP was approved, then the US Treasury overruled the Federal Reserves guidelines

Keep repeating your silly claim. TARP has nothing to do with the Fed.

it was a money free for all, spending 16 trillion according to the GAO.

The Treasury only spent the $700 billion authorized by Congress. The Treasury did not spend $16 trillion.

Couldn’t have been done with the passage or TARP.

The Fed can spend and loan money without TARP.

Really has nothing to do with the Federal Reserve, the article is all about TARP,

TARP didn't even break $1 trillion. And the Fed wasn't involved with TARP.

You will need to read up on the President’s Plunge Protection Team

You're just full of jokes today.

[Razzz42]

The World’s ‘Reserve’ Currency Mandate is the US dollar. Everything is priced and traded in US dollars. If you have pesos and want to buy a barrel of oil on the open market then you first have to convert pesos to the US dollar value at time of purchase. FOREX markets track foreign currency values against the US$.

From: http://www.answers.com/topic/foreign-exchange-market#ixzz1fRuHXVrr

On the spot market, according to the 2010 Triennial Survey, the most heavily traded bilateral currency pairs were:

EURUSD: 28%
USDJPY: 14%
GBPUSD (also called cable): 9%

and the US currency was involved in 84.9% of transactions, followed by the euro (39.1%), the yen (19.0%), and sterling (12.9%) (see table). Volume percentages for all individual currencies should add up to 200%, as each transaction involves two currencies.

Trading in the euro has grown considerably since the currency’s creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EURUSD and USDZZZ. The exception to this is EURJPY, which is an established traded currency pair in the interbank spot market. As the dollar’s value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased.
......

A bit dated but notice how there is interest in using other currencies like the Euro to price commodities but you can see what a meltdown is happening there forcing everyone back to US$ commodity pricing. Probably back above 90% for commodities price in US dollars now.

[Toddsterpatriot]

If you want to be taken seriously, answers.com isn’t helping your cause.

[Razzz42]

You are on your own now. Can’t help you if you refused to learn...

The Working Group on Financial Markets (also, President’s Working Group on Financial Markets, the Working Group, and colloquially the Plunge Protection Team) was created by Executive Order 12631,[1] signed on March 18, 1988 by United States President Ronald Reagan.

The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 (”Black Monday”) to give recommendations for legislative and private sector solutions for “enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence”.[1]

As established by Executive Order 12631, the Working Group consists of:

The Secretary of the Treasury, or his designee (as Chairman of the Working Group);
The Chairman of the Board of Governors of the Federal Reserve System, or his designee;
The Chairman of the Securities and Exchange Commission, or his designee; and
The Chairman of the Commodity Futures Trading Commission, or his designee.

[Toddsterpatriot]

Keep posting stuff that doesn’t prove your claims. LOL!
Good night.

[DannyTN]

Starting and running a commodities exchange or any other exchange is easy. Getting people to participate in investments denominated in your itty bitty country’s currency, not so easy.

I don’t see how your comments are that relevant to this thread anyway.

The FED helps world central banks because the U.S. economy is 1/5 of world GDP, not because most commodity transactions are executed in dollars.