GAO Audit Reveals Fed Loaned $16 Trillion to Banks
This is from the newsroom of Senator Bernie Sanders' website:
"The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. '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,' said Sanders. 'This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else.'"
So who were the recipients of these loans? Unelected.org breaks down page 131 of the full GAO audit as such:
Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places
Please, spare me for the moment all talk of the debt-ceiling. At this point I could not care any less. Its morphed into a fortuitous distraction for the Federal Reserve, which apparently is being governed by people who have quite clearly lost their minds. Debt limits have failed spectacularly to restrain the issuance of government IOUs, so its vexing to see so many take them so seriously. At $14.294 trillion, the current debt ceiling its bested by the amount already lent by the Fed. Similarly, the effects of a government default on its debt obligations have been blow way out of proportion.
$16 trillion.
This is what causes recessions. Not the Community Reinvestment Act. Not Fannie Mae or Freddie Mac. Not the ratings agencies. Not credit default swaps or stock options or bundled mortgage securities any other financial derivatives. Not increased savings. Not the Chinese. Try fiat credit expansion.
Its interesting how the Fed can introduce $16 trillion into the global economy with almost full media impunity. You can count on the unfortunate passing of Ms. Winehouse to (regretfully) receive much more attention than this.
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May '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
I always understood that loaning money to banks is how the Fed is supposed to operate.
Sep '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
The only candidate who would take on the fed. is Ron Paul. The establishment may or may not have known about the particulars, but during bail out hearings and subsequently treasury secretaries, ie: Paulson and tinny Tim testified they were coordinating their actions with the FED. How can you do that if you have no knowledge of what the Fed is doing. In case you haven't noticed the same con is being run with the debt ceiling - we have to do something or the markets will panic. I think Paul will run as a 3rd party candidate, support him.
Sep '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
The Fed makes collateralize overnight loans to banks to assist the functioning of credit markets. This data has always be public and is not what is being referred to in the GAO report. In these cases the FED made non-collateralize loans at 0.25% and the banks for the most part bought Treasury bonds a 3-4%. The executives of the banks share in the profits. These were the same execs that made the boneheaded decisions that got the banks in trouble to begin with. This is all perfectly legal.
Feb '11
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
$16 trillion? Hold on... [vomit]
You're exactly right, this is how recessions start, or maybe depressions. The question I have is where did the money go, it's not like the economy is booming.
Jul '11
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Does the GAO audit also reveal the $16 trillion in unfunded Social Security liabilities? Gee, the gov't does such a bang-up job of not only spending the money we have, the money we might have at some point in the future, and the monies of at least 3 generations of our descendants, well, it's not hard to want to entrust them with virtually all my earnings. They clearly know what they are doing. Just ask them. They'll tell ya.
"On a 75-year basis, Social Security is bankrupt: Promised benefits far exceed estimated revenues, and if all future benefits beyond this time frame are included, the unfunded liabilities are nearly $16 trillion."
http://www.cato.org/pub_display.php?pub_id=12082
Edited on Jul 24, 2011 at 7:17amJul '11
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Does the GAO audit also reveal the $16 trillion in unfunded Social Security liabilities? Gee, the gov't does such a bang-up job of not only spending the money we have, the money we might have at some point in the future, and the monies of at least 3 generations of our descendants, well, it's not unreasonable to want to entrust them with virtually all my earnings, is it? They clearly know what they are doing. Just ask them. They'll tell ya.
"On a 75-year basis, Social Security is bankrupt: Promised benefits far exceed estimated revenues, and if all future benefits beyond this time frame are included, the unfunded liabilities are nearly $16 trillion."
http://www.cato.org/pub_display.php?pub_id=12082
Edited on Jul 24, 2011 at 7:15amJun '11
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Levi Spires: $16 trillion? Hold on... [vomit]
You're exactly right, this is how recessions start, or maybe depressions. The question I have is where did the money go, it's not like the economy is booming. · Jul 24 at 6:38am
Short answer is that it didn't go anywhere-- because it never actually existed.
Oct '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Levi Spires: $16 trillion? Hold on... [vomit]
You're exactly right, this is how recessions start, or maybe depressions. The question I have is where did the money go, it's not like the economy is booming. · Jul 24 at 6:38am
Been to the Hamptons, or Geneva? Their economy is really booming.
Oct '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Terry
Levi Spires: $16 trillion? Hold on... [vomit]
You're exactly right, this is how recessions start, or maybe depressions. The question I have is where did the money go, it's not like the economy is booming. · Jul 24 at 6:38am
Short answer is that it didn't go anywhere-- because it never actually existed. · Jul 24 at 7:25am
Oh, it exists all right. In these modern times we save the cost of printing 10s, 20s, and Bens. Now we call it credit, and if you are buying a house, do you ever see Ben at the payment window? It is very real, and it is competing with Ben.
Oct '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Ok, a few points:
We had a monetary collapse. Trillions of dollars vanished into thin air. What was the Fed supposed to do? It didn't create that money, the private sector did (via tri-party repos, complicated swap agreements, etc). Most money is created by the private sector. In the end, you can't prevent private-sector money creation; even stocks can be a form of money.
Nov '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Buy gold.
May '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
The Fed sets reserve requirements. Reserve requirements determine how much credit the banks will create. Set reserve requirements to 100%, and the banks can't create credit. Thus, the Fed facilitates the creation of credit (at least in this country). If the Fed sets the reserve requirement at 10%, then a $1 billion open market purchase of government debt by the Fed will end up creating $9 billion by the time the lending process ends.
Banks have responsibilities as well. If they engage in fractional reserve banking, i.e., foolish business practices, and end up lending too much provoking a bank run, then they should go out of business, not be the recipients of corporate welfare from central banking systems.
Edited on Jul 24, 2011 at 1:17pmMay '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
He did, which is why many contemporary critics of the Fed, particularly the Austrian school, give Friedman hell for having argued along those lines. See here, here, here, and here.
Edited on Jul 24, 2011 at 1:18pmJul '11
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
The monster from Jekyll Island rears its ugly head.
Nov '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
raycon
Levi Spires: $16 trillion? Hold on... [vomit]
You're exactly right, this is how recessions start, or maybe depressions. The question I have is where did the money go, it's not like the economy is booming. · Jul 24 at 6:38am
Been to the Hamptons, or Geneva? Their economy is really booming.
Expliquez.
Geneva must suffer from one of the highest rates of inflation of any city in the world! I've been guilty of frivolous travel expenditures, but even I am appalled at the price of a hotel room/dinner/symphony ticket in that lovely part of the world.
Oct '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Michael Labeit
The Fed sets reserve requirements. Reserve requirements determine how much credit the banks will create. Set reserve requirements to 100%, and the banks can't create credit. Thus, the Fed facilitates the creation of credit (at least in this country). If the Fed sets the reserve requirement at 10%, then a $1 billion open market purchase of government debt by the Fed will end up creating $9 billion by the time the lending process ends.
Fractional reserve banking has nothing to do with it. Credit is constrained by interest rates; nothing more, nothing less. New Zealand tried to control credit with reserve requirements alone and not interest rates, and do you know what happened? Ration lines. They had to ration credit. It was like price controls.
We didn't have a run on fractional-reserve institutions. We had a run on the short-term tri-party repo market. Reserve requirements don't matter, the private sector can invent new forms of money.
Oct '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Tell me, what is the difference between an investment bank that borrows short and lends long (e.g. borrows in 1-day increments to fund long-term assets) and a traditional fractional-reserve bank?
Oct '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
Michael Labeit
He did, which is why many contemporary critics of the Fed, particularly the Austrian school, give Friedman hell for having argued along those lines. See here, here, here, and here. ·
Edited on Jul 24 at 01:18 pm
And I'm sure these people still believe that central banks can magically affect mortgage rates and create housing bubbles? There's far more evidence the Fed caused the housing bubble by raising rates than by lowering them (why else would investors around the world have flooded the U.S. economy with credit, if not for the higher yield from a central bank tightening cycle?).
The flaw in modern monetary policy is that inflation is controlled by punishing manufacturing. All the central banks agree on this. Raising short-term interest rates can have the perverse effect of lowering long-term rates, due to foreign investors flooding the economy with credit. Inflation goes down because of output losses in manufacturing and the disinflationary impact of dollar appreciation.
Sep '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
I'm poor so I buy silver. When Helicopter Ben talks (he was actually quoting Greenspan) my net worth goes up while the economy dissolves. Or I stay solid it's relative.
May '10
Re: GAO Audit Reveals Fed Loaned $16 Trillion to Banks
An investment bank qua investment acts as a true intermediary, earning a profit off of interest rate differentials. They'll borrow at X% and lend at X+%. They also purchase shares in primary stock markets. Fractional reserve banks lend the bulk of their demand deposits and keep only a fraction to facilitate anticipated withdrawals. They also sell Treasury debt to the Fed which pays them with money it creates at its New York branch. The first form of banking is legitimate. The second is as fraudulent as they come.