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

[kayjayuu.livejournal.com]

Well that kind of proves my initial point that the Tea Party opposition didn't have roots in the bailout in 2008

Don't speak for all the initial TP-supporters. They were/are just as grassroots and everyday as many of the OWS people.

I saw Rick Santelli's rant (http://youtu.be/DHbjenBMLno) first-run on TV, quite by accident, because I was glued to these financial channels for the first time in my life for fear of something horrible happening, like everyone else. THAT'S what made me sit up and take notice, that someone -- I didn't care WHO -- was willing to say "The Emperor Has No Clothes!" and ask people who had no input around him what they thought... and they agreed.

THAT'S what made me wonder if a "Tea Party" could really happen. THAT'S what accelerated my fury. Just like Ad Buster's said "hey, let's occupy wall street." There was an actual beginning to the movement at a time when people were f'ing scared to death because the media and the leaders were all running around screaming "But we're all going to die!"

Don't tell me when I got involved. I know it like most people know where they were when Kennedy was shot.

[blueduck37.livejournal.com]

The Santelli rant was in February of '09, not 2008, which, again, proves my point.

[kayjayuu.livejournal.com]

If you recall, via wiki's timeline (since I don't), September 18, 2008 was when Paulson et al proposed the bailout, saying "we may not have an economy by Monday if we don't do this." It was defeated in the House 11 days later, passed in the Senate on October 1, signed into law on the 3rd. So in roughly two weeks of constant drum beating about "the sky is falling, the sky is falling!" we were as deer caught in the headlights of an oncoming bus. *mixes metaphors some more*

A week later, the Dow had a record tank. What was supposed to prevent a crisis had not. Still, we hoped the experts/politicians/financial geniuses were right. (Except Peter Schiff, no one listened to him, ever. And he was right.)

October 14th the Fed uses the money set aside by the Save Our Skins law. Now things had to get better.

During November our heads kept spinning as this bank failed and that bank was rescued, and the Fed continued to inject several hundred billion here and a trillion there... we lost count. Even now I have to consult a timeline to remember the horrible news that hit day after day after day. Europe begins to keen. Dow hovers above 8000 (remember that, kiddies?) Bernie Madoff is exposed. Everyone holds their breath over Christmas and tells Santa that all they want is for the world to hold together.

Surely the experts are right. It'll start turning around any day now.

Two days before the inauguration, the markets dive on worries in Europe. This has nothing to do with Obama, but it doesn't help matters. The Dow continues its decline and yes, by this time, people are thinking you know, SURELY THE EXPERTS ARE RIGHT, IT'LL TURN AROUND ANY DAY NOW.... RIGHT???

So when on February 19, 2009, Santelli had his rant smack dab in the middle of the march to Dow 6440 on March 9th (last seen in 1996 and ending a drop greater than that seen in the Great Depression -- pounded into our heads incessantly by the media day after day after miserable day), yeah, people are wondering WHY THE HELL IT ISN'T TURNING AROUND LIKE THE EXPERTS SAID.

It had nothing to do with Obama. The "tea party" comments were in response to the government then turning around and saying maybe they'd help out mortgage holders who were not paying, and the people who struggled and did the right thing all their lives and paid on time were thinking "whaaaa??". THAT'S what precipitated the "tea party" moment. NOT "we have a black president wtf?" NOT "well, you know, Dick Armey sez..."

We, as a country and as a people, were being scared to death by the doom and gloom media, the do-nothing politicians, and the very very real consequences that affected real every day people of all classes and races. And nobody was trying to stop the runaway train, all they wanted to do was wring their hands and throw money at it.

How interesting that I come across a January 9, 2009 article that references almost the exact numbers being screeched about in the OP's post -- almost $8 trillion. (http://money.cnn.com/2009/01/06/news/economy/where_stimulus_fits_in/index.htm)

By the time the president wanted still more money to "fix the problem," we'd finally come out of our daze and had. enough.

It was $8 trillion then, it's $8 trillion now, and nothing has changed. It just went down the memory hole until someone dug it out and the outrage started all over again. It should never have STOPPED, but we were utterly overwhelmed with bad news and fear.

So, how did those dates prove your point again?