The Secret $7.77 Trillion Bailout

[blueduck37.livejournal.com]

Apologies if this story was posted here already; I couldn't find a post on it.

Now we've all heard the lie statement that the Tea Party began as a cultural backlash to a new President, who to conservatives was the face of a changing America that scared them protest and backlash to the 2008 TARP program even though no conservative protests occurred until early 2009.

So I assume they will join Occupy Wall St in demanding major changes to Wall St and our banking system after Bloomberg News' big story about a shadow bailout that was occurring, via the Federal Reserve. They gained this info through the invaluable Freedom of Information Act. As the article notes, "It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. 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."

The article discusses how this "secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger."

To me, the most anger-inducing facts are the lies and deception that surrounded this, from the Wall St. end. We learn that Wall St firms lied to investors (pretending to be healthy, while this was going on), as well as to Congress, who passed a weak reform bill with bad information.

For instance, we learn that-

Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.
....

JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.

And that-

New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.

Free market!

Multiple Senators are quoted as saying “We didn’t know the specifics," which is great for a democracy. It notes that having all of the information of what was really going on would have likely resulted in a different (stronger?) Wall St reform bill. As it is, it doesn't really fix anything. Too big to fail still exists, etc.

If news about a secret bailout and its surrounding deception doesn't spur any action for real change, nothing will. This is why many in the OWS movement feel the system is hopeless. And that's not good for democracy either.

[PS- Bloomberg News also has another great story about how, as Bush's Treasury Secretary, Hank Paulson passed on insider info to his hedge fund friends.]

Comments

[the-rukh.livejournal.com]

I wonder if we can get a total percentage of that which was used for propaganda against financial reform.

[mrbogey.livejournal.com]

I'm glad you struck out the blatently false stuff in the first paragraph.

Tea Party won't join the Occupiers because the TP isn't advocating a stronger gov't that has total control over the financial sector.

[blueduck37.livejournal.com]

Three points:

1. Prove me wrong

2. Way to avoid the actual, uncomfortable main topic. Kudos.

3. Total control? What a strawman. Was Glass-Steagall "total control"? Etc.

[underlankers.livejournal.com]

No, it advocates a stronger government that bans Islam and reduces homosexuality to something treated by religiously sanctioned brainwashing by electrodes to the testicles. That's if we're describing the ones that actually do things in US states.

[squidb0i.livejournal.com]

And your famous opposite-reality reply does not disappoint.

[the-rukh.livejournal.com]

Yeah that's the other thing. CEOs getting 7 figure salaries? WE are paying them to screw us.

[hikarugenji.livejournal.com]

I just don't understand how people can read this kind of article, coupled with the fact that only the richest people have seen their income and wealth grow in the last 30 years, and *not* believe that there's something wrong with the influence the wealthy have over the government.

[badlydrawnjeff.livejournal.com]

Well, part of the problem is that your premise (http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=1140) isn't true (http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4049).

Whether the wealthy have too much influence or not doesn't necessarily seem to apply here - the issue with the bailouts is not that the wealthy received them, but because the government and the Fed believed that saving the banks was a better option than letting them fail. You do not have to be wealthy or a banker to agree with that point of view, or the opposite.

[gunslnger.livejournal.com]

Funny, my income and wealth has been growing just fine for the past 15 years, and pretty much the same for everyone I know, none of whom are anywhere near the supposed 1%.

[kayjayuu.livejournal.com]

I'm sorry, I really can't get past your second paragraph. Nobody made me drive a hundred and twenty miles to attend a rally before whatever the Tea Party became that requires the regurgitation of such drivel. Despite whatever the current iteration of "here's why the Tea Party is a lie and you should hate hate hate anyone who utters the words without spitting" is, there really was/is a basic foundation of everyday people who have just. simply. had. enough. of this fucking government. Forget whoever is the president, it was CONGRESS and the shadow FED that bears the brunt of our anger.

If you sincerely want people like me (and I am NOT a Tea Party member, whatever that is, but I do relate to the reasons behind the movement in the same way that I relate to some of the reasons behind OWS) to join people like Occupy Wall Street members (whatever that is), then you need to get over the disparaging remarks and seek common ground. Otherwise it's divide and conquer by The Powers That Be, just like they want it.

BTW, this story infuriates me. Does that help?

[blueduck37.livejournal.com]

Yes, that helps. I appreciate the feedback, even if critical.

[kylinrouge.livejournal.com]

Hopefully this is the fuel that makes people realize we have a bought Congress that's completely beholden to special interests.

[badlydrawnjeff.livejournal.com]

I'm confident that the Tea Party will continue to oppose bailouts in all forms (that's quite a nifty piece of timing to get them back on the horse), and the OWS protesters will continue to whine about the private sector, ignoring that it was the public sector and the Fed that caused the problem here.

Bailouts bad. Let banks fail. It ain't hard.

[pastorlenny.livejournal.com]

But without someone to scam public-sector pension fund managers into buying overpriced bonds, the economy can't function! Don't you know anyting about economics?

[malakh-abaddon.livejournal.com]

Got to love predatory economics. I mean damn the unions, and their over priced under worked members, who demand top dollar for menial labor, and massive retirement benefits. Wait... what am I on about? I forgot... Oh bloody heck, I think I am suffering from some form of dementia, but because of my preexisting history of concussions.... Oh never mind.

Here is how I see it, the bailouts went to the wrong groups. That 700 billion dollars should have gone to the American people who made under x amount of dollars per year. I leave the x amount of dollars per year to all of you, as I feel/fear that you, the people in this community, have the common sense to see where this is going. I have said since day one, when Dubya started this bailout debacle, that people know what they owe, and given the opportunity to be debt free, be secure with their vehicles and homes, would opt to pay off their debts. Those with less debt, would most likely spend that money for odds and ends things that they needed or wanted. "Hey, I need a new truck/car or both, and without this x amount of dollars I could not afford one, so let me go to the dealership and buy a brand spanking new one." That bails out the car markers. Another guy "hey I owe x amount of dollars on my home, let me take this money and pay off as much of my mortgage as I can..." hey banks are dropping their toxic debt.

You cannot build anything from the roof down, you have to build from the ground up. The stronger the poor and middle classes are, the stronger the economy becomes, because they drive the everyday economy. They buy the majority of things, they are the 99%.

[politikitty.livejournal.com]

The Fed is supposed to be independent, and has always operated behind closed doors. So Senators should not be privvy to a lot of what the Fed does. Whether that's a good or bad thing, the Fed was developed to be insulated from the whims of democracy.

This is all classic regulatory capture, and stuff that Libertarians have been preaching for decades. It seems kinda politically motivated for you to call out the Tea Party not joining OWS, when it seems that OWS should equally be heading over to the libertarian camp to use their candidates as way to spread the message.

[the-rukh.livejournal.com]

Did you miss the part about a lot of that money going to fighting against financial regulation through lobbying. It is exactly the kind of thing that OWS wants to prevent. I really don't see how libertarians wanting to just hand the government over to the banks would achieve OWS goals. Seems you're operating from ideology over fact.

[gunslnger.livejournal.com]

Looks like we have to pull out the facts again and remind people of the truth, again.

http://www.dailykos.com/story/2007/11/24/414156/-Ron-Paul-Supporters-Plan-$10M-Tea-Party
http://latimesblogs.latimes.com/washington/2009/04/ron-paul-tea-party-tea-parties-income-tax.html
http://www.alternet.org/news/145630/ron_paul_helped_inspire_the_tea_party_movement,_and_now_it_could_take_him_down/

[blueduck37.livejournal.com]

This reply only works if you believe that "Tea Party" and Ron Paul supporters are all the same group.

[gunslnger.livejournal.com]

It notes that having all of the information of what was really going on would have likely resulted in a different (stronger?) Wall St reform bill.

And the fact that the central planners can never have all the needed information is why it's bad to have central planners mucking with things. The fact that you think you just need more information for the central planners is what makes you just another tool.

[underlankers.livejournal.com]

What the fuck? What he said has nothing to do with the real version of central planning.

[underlankers.livejournal.com]

Corporate leaders lie and commit fraud all the time. Corporate bureaucracy in fact rewards failure and tends to punish competition and success. But that's why corporate bureaucracy is accountable, honest, and good where government bureaucracy is a mole on Satan's left ass crack.

[underlankers.livejournal.com]

The above post brought to you by Libertarian Under L, because the only good bureaucracy, is a private bureaucracy.

[malasadas.livejournal.com]

Am I the only one who looks at the scale of the liquidity the Fed pumped into the financial system, and then looks at the kind of person Bernake was prior to 2008 and thinks "wow, we must have been way closer to an utter and total financial holocaust than anyone outside the Fed has realized to date?" Bernake is pretty conservative by nature and history...he would not have done this without the shit being really really bad. Subsequent disingenuous behavior from bankers is a different issue.

And I've known the Fed had dropped at least an additional 2 trillion prior to this revelation. 7 plus is boggling...that's half the total economic output of the country in that year being infused into the financial sector to keep them liquid through the crisis.

[malasadas.livejournal.com]

Oh, and for e record? Letting the entire financial system of the United States collapse into full and total meltdown as was a distinct possibility after the Lehman collapse? Not an option from my point of view. It might be fun to contemplate the financial equivalent of the extinction event that wiped out the dinosaurs on paper...the consequences for decades of the world's economic output and potentially billions of people? Not so much fun.

[blueduck37.livejournal.com]

Tell that to Jeff. He believes in a magic scenario where we don't bail them out but they save themselves through Ayn Rand magic.

[gunslnger.livejournal.com]

And does this mean you'd support Ron Paul's Audit the Fed legislation?

[blueduck37.livejournal.com]

Absolutely.