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

[badlydrawnjeff.livejournal.com]

If the banks are to blame, we blame the banks.

If the government is to blame, we blame the government.

My answer was not one of evasiveness, but one of it being dependent on what actually happens.

[blueduck37.livejournal.com]

In what scenario would you actually blame the banks though?

[badlydrawnjeff.livejournal.com]

In a scenario where the banks are at fault.

[blueduck37.livejournal.com]

Shorter Jeff: I will never blame the banks, except in some hypothetical fantasy scenario, but I will be insulted if you call me a corporate/Wall St apologist.

[gunslnger.livejournal.com]

That's not anything like what he said, and you know it.

[badlydrawnjeff.livejournal.com]

I'll blame the banks when the banks deserve blame. I say X, you claim I say Y. I'll let my words speak for themselves, thanks.

[blueduck37.livejournal.com]

Well, okay sir, let's go to your words then!

You said: "In a scenario where the banks are at fault."

Then please name me a scenario in the past 5 years that you feel that they would be/were.

[badlydrawnjeff.livejournal.com]

Odd time frame you offer here. I'm not sure there's one in the last 5 years worth noting. That does not mean the banks have been perfect in the past or will be perfect in the future, obviously. If and when such a situation occurs, I'll be glad to place the blame where it belongs, just as I am now.

[blueduck37.livejournal.com]

I'm not sure there's one in the last 5 years worth noting.

Holy shitballs.

Well for anyone reading these... I'll let that speak for itself.

[badlydrawnjeff.livejournal.com]

That's a first.

[badlydrawnjeff.livejournal.com]

I don't see evidence that the latter occurred in any significant way, or that the former occurred at all.

[blueduck37.livejournal.com]

You heard it here, folks.

Jeff doesn't believe any significant predatory lending occurred in the past decade, and believes that NO mortgage fraud occurred at all.

But don't interpret that as him being Wall St apologist, or you'll upset him!

[badlydrawnjeff.livejournal.com]

You unsurprisingly reversed my statement, of course.

[kayjayuu.livejournal.com]

Well, even I disagree with that.

[badlydrawnjeff.livejournal.com]

Why?

[kayjayuu.livejournal.com]

You seem to believe there was no predatory lending going on, and very little mortgage fraud.

Maybe BoA et al weren't doing the direct lending to people with no job and no money, but they certainly knew it was happening and happily bought the bundles and shaved them off to other buyers. A bit fraudulent there.

[blueduck37.livejournal.com]

Ooops, look out below, it's a reality bomb (http://thinkprogress.org/economy/2011/12/01/379332/former-banker-subprime-pushed/)!! Take cover!!!

[badlydrawnjeff.livejournal.com]

I'll need a little more than some guy who lost his job, to be honest.

[blueduck37.livejournal.com]

OMG! I found the Wall St banker you'll distrust... one whose statements threatens your worldview!

It's a start!

[underlankers.livejournal.com]

Provide an example of a scenario where banks are at fault. It doesn't have to be limited to the 21st Century. Unless you think they're never at fault and that even Fugger-era politics was socialism and tyranny of the most wretched and abominable sort.