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.

[the-rukh.livejournal.com]

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

[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.

[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.

[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]

While the original Tea Party was created as a bid for Ron Paul's presidency, what Ron Paul represented to them was a change in government. They believed neither side- Democrat nor Republican, would provide this change. In a way, you can see through Ron Paul's repeated failures that special interest groups and lobbying firms must see Ron Paul as being unwilling to be 'bought out' like the two main parties (the more left-leaning example would be Mike Gravel I believe).

It's unfortunate that the current TP has retconned this history into being a branch of the Republican party that it is today, but that's just how things are. If you don't like what it is now, then don't associate with it, but a label is just a label. It's pointless to be angry at the mis-characterization of its origins is what I'm trying to say.

[kylinrouge.livejournal.com]

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

[kayjayuu.livejournal.com]

I'm angry at the label being mis-characterized when it's applied to me because I share beliefs with the origin.

I could also say that OWS is embracing association with powerful organizations and that the president is trying to co-opt whatever momentum he thinks it has. So in a few years it too will be OWS = unions/Democrat Party/Obama/Big Name Liberal Nonprofits/George Soros, and nothing more. Perfect for the powerful in business and politics, because then neither side can relate to each other, nor care to.

I reject the negative label, and I do it publicly.

[kayjayuu.livejournal.com]

... I need an icon.

[kayjayuu.livejournal.com]

You're welcome. And I appreciate the sentiment behind what drives you.

[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.

[badlydrawnjeff.livejournal.com]

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

When you offer a premise that is shot from the get-go, what do you expect? I don't think anyone disagrees with your broader point, but when you have to sprinkle in something like that, are you anticipating not being called out on it?

[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.

[allhatnocattle.livejournal.com]

dry fisted multiple times backdoor screwing

[badlydrawnjeff.livejournal.com]

Depends on who's to blame.

[hikarugenji.livejournal.com]

The problem is not the initial bailouts, which I actually reluctantly agreed with, but the fact that they were accepting bailout money while simultaneously spending money to convince lawmakers not to increase regulation on them to prevent this kind of thing from happening again.

[hikarugenji.livejournal.com]

You don't think things would have been even worse if all the banks had just been allowed to collapse? What would have happened?

[johnny9fingers.livejournal.com]

….And fraudulently claiming to be healthy, and giving their executives huge remuneration on the basis of that good health.

Re: Occupy Memphis, Tea Party Members Meet

[rick-day.livejournal.com]

Intoning absolutes, then getting called out on it.

What's the penalty for that?

[rick-day.livejournal.com]

pretty much nothing.

If someone has more than the FDIC insured amount in any given bank. they are simply taking a 'risk' the bank will remain solvent.

True bank 'assets' besides the brick and mortar, are transferred not by armoured car, but by the push of a few buttons.

When a bank fails, another bank absorbs the assets/liabilities and the assets are transferred to someone with a different operating name.

If the big bank crashes, then it sucks to have your risk bite you in the ass; don't risk your money that way.

Learn next time not to gamble with savings and put cash assets in not a bank, but a financial services specialist like, say..Fidelity, or something so big that if IT failed, US currency would be basically worthless in the new burning society and the issue moot.

That is the point. It is an empty ghost sheet. There is nothing to fear if bad businesses fail.

[blueduck37.livejournal.com]

Oh, I don't mind being called out on it. But as I said, prove me wrong.

Also: "I don't think anyone disagrees with your broader point"

Cool. So what's your answer to this deception on the part of Wall St, and the fact that the too-big-to-fail problem has only gotten worse since 2008? More tax cuts?

[blueduck37.livejournal.com]

Many groups are definitely attempting to co-opt OWS, for sure. I think they'll find it hard to do... the OWS people I know are way more anti-establishment than any protest group I've encountered in recent years.

[blueduck37.livejournal.com]

Okay, so will the Tea Party rise in physical protest to these new revelations the way they did to imaginary death panels and fantasy czars? Please show me!

I'm pretty sure their mantra is that the "free market"-- which would include all of the banks being discussed here-- can never do wrong and should not be regulated in any way.

OWS protesters will continue to whine about the private sector, ignoring that it was the public sector

The public sector bundled bad mortgages into securities and CDOs and deceived their own investors for the sake of short-term profit and enriched themselves with trillion dollar bailouts while not delivering on the promised lending to communities and small businesses??!! :0 Wow, Jeff, you've got quite a scoop on your hands... have you contacted the Bloomberg news service???!