Have You Heard About The 16 Trillion Dollar Bailout The Federal Reserve Handed To The Too Big To Fail Banks?

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
America's Next TARP Model
www.thedailyshow.com
Daily Show Full Episodes Political Humor & Satire Blog The Daily Show on Facebook

Video:  America’s Next TARP Model – with Jon Stewart on the Daily Show

What you are about to read should absolutely astound you. During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret.

Do you remember the TARP bailout? The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the "too big to fail" banks. Well, that bailout was pocket change compared to what the Federal Reserve did. As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars in nearly interest-free money to the "too big to fail" banks between 2007 and 2010. So have you heard about this on the nightly news? Probably not. Lately Bloomberg has been reporting on some of this, but even they are not giving people the whole picture. The American people need to be told about this 16 trillion dollar bailout, because it is a perfect example of why the Federal Reserve needs to be shut down. The Federal Reserve has been actively picking "winners" and "losers" in the financial system, and it turns out that the "friends" of the Fed always get bailed out and always end up among the "winners". This is not how a free market system is supposed to work.

According to the limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the grand total of all the secret bailouts conducted by the Federal Reserve during the last financial crisis comes to a whopping $16.1 trillion.

That is an astonishing amount of money.

Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.

The total U.S. national debt is only a bit above 15 trillion dollars right now.

So 16 trillion dollars is an almost inconceivable amount of money.

But some other dollar figures have been thrown around lately regarding these secret Federal Reserve bailouts. Let's take a look at them and see what they mean.

$1.2 Trillion

A recent Bloomberg article made the following statement....

The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The $1.2 trillion figure represents the peak outstanding balance on these loans, not the total amount of all the loans. On December 5, 2008 the "too big to fail" banks owed this much money to the Federal Reserve. Many of them could not pay these short-term loans back right away and had to keep rolling them over time after time. Each time a short-term loan got rolled over that represented a new loan.

$7.7 Trillion

Bloomberg is reporting that the Federal Reserve had made a total of $7.77 trillion in financial commitments to the big banks by the end of March 2009....

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.

But as mentioned above, a one-time limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act covered an even broader time period and revealed even more bailout loans.

According to the GAO audit, $16.1 trillion in secret loans were made by the Federal Reserve between December 1, 2007 and July 21, 2010. The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report....

Citigroup - $2.513 trillion
Morgan Stanley - $2.041 trillion
Merrill Lynch - $1.949 trillion
Bank of America - $1.344 trillion
Barclays PLC - $868 billion
Bear Sterns - $853 billion
Goldman Sachs - $814 billion
Royal Bank of Scotland - $541 billion
JP Morgan Chase - $391 billion
Deutsche Bank - $354 billion
UBS - $287 billion
Credit Suisse - $262 billion
Lehman Brothers - $183 billion
Bank of Scotland - $181 billion
BNP Paribas - $175 billion
Wells Fargo - $159 billion
Dexia - $159 billion
Wachovia - $142 billion
Dresdner Bank - $135 billion
Societe Generale - $124 billion
"All Other Borrowers" - $2.639 trillion

This report was made available to all the members of Congress, but most of them have been totally silent about it. One of the only members of Congress that has said something has been U.S. Senator Bernie Sanders.

The following is an excerpt from a statement about this audit that was taken from the official website of Senator Sanders....

"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"

So where is everyone else?

Why aren't leading Republicans and leading Democrats crying bloody murder over this report?

This scandal should have been front page news for months when it was revealed.

But it wasn't.

And Guess what?

Not only did the Federal Reserve give 16.1 trillion dollars in nearly interest-free loans to the "too big to fail" banks, the Fed also paid them over 600 million dollars to help run the emergency lending program. According to the GAO, the Federal Reserve shelled out an astounding $659.4 million in "fees" to the very financial institutions which caused the financial crisis in the first place.

In addition, it turns out that trillions of dollars of this bailout money actually went overseas. According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia.

So why were our dollars being used to bail out foreign banks while tens of millions of American families were deeply suffering?

That is a very good question.

Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.

According to a recent Bloomberg article, the big banks brought in an estimated $13 billion by taking advantage of the Fed’s below-market rates....

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

So once the financial crisis was over, were adjustments made to the financial system to make sure that this type of thing would never happen again?

Of course not.

Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

So now they are more "too big to fail" than ever.

But this is what happens when we allow unelected central bank bureaucrats to run our financial system.

Most Americans do not realize this, but the truth is that the Federal Reserve is not part of the government. In fact, it is about as "federal" as Federal Express is. The Federal Reserve has admitted that they are a privately owned institution in court many times, and you can see video of a Federal Reserve employee admitting that the Federal Reserve is privately owned right here.

The Federal Reserve is an out of control monster that is throwing around trillions of dollars whenever it wants to. Nobody should be allowed to do this. Nobody should be allowed to give bailouts to banks and corporations without the express permission of the U.S. Congress and the president of the United States.

This is a point that I made in my article yesterday. The Federal Reserve decided this week that it is going to provide "liquidity support" to Europe. If the American people do not like this move, that is just too bad. We do not get a say in the matter.

Are you starting to understand why I keep pushing the idea that it is time to shut down the Federal Reserve?

Please share this information about the secret 16 trillion dollar Federal Reserve bailout with your family and your friends.

If we can get enough people to wake up, perhaps there is still time to change the direction that this country is headed.

From the Economic Collapse Blog

Video: The Fed Grants $7.77 Trillion in Secret Bank Loan - Now Do You Understand Occupy Wall Street?

Kucinich bill seeks to end the Federal Reserve:

Kucinich bill seeks to end the Federal Reserve!
http://www.godlikeproductions.com/forum1/message1718844/pg1
Kucinich bill seeks to end the Federal Reserve
http://www.rawstory.com/rs/2011/12/01/kucinich-bill-seeks-to-end-the-federal-reserve/

Related:

WHAT THE HELL? The U.S. Secretly loaned 7.7 TRILLION To Banks Without Interest. Then Borrowed Back WITH Interest
http://www.godlikeproductions.com/forum1/message1718942/pg1

America's Next TARP Model
http://www.thedailyshow.com/watch/thu-december-1-2011/america-s-next-tarp-model

A Bloomberg report reveals that the U.S. government loaned banks $7.7 trillion in secret bailout funds at no interest and then borrowed the money back at interest.
Bloomberg reports 7.7 trillion in loans to big banks and Wall Street
http://reading-sage.blogspot.com/2011/11/bloomberg-reports-77-trillion-in-loans.html?m=1pg1

h/t to Jean Stoner

BANK OF AMERICA TO CHARGE $5 MONTH FEE FOR USING DEBIT CARD

NEW YORK (The Blaze/AP) — Bank of America plans to start charging customers a $5 monthly fee for using their debit card to make purchases. The fee will be rolled out starting early next year.

A number of banks have already either rolled out or are testing such fees. But Bank of America’s announcement carries added weight because it is the largest U.S. bank by deposits.

Anne Pace, a Bank of America Corp. spokeswoman, said Thursday that customers will only be charged the fee if they use their debit cards for purchases in any given month. Customers won’t be charged if they only use their cards at an ATM.

The fee will apply to basic accounts and will be in addition to any existing monthly service fees. For example, one of the bank’s basic accounts charges a $12 monthly fee unless customers meet certain conditions, such as maintaining a minimum average balance of $1,500.

A fee for using debit cards is still a novel concept for many consumers and was unheard of before this year. But there are signs it may soon become an industry norm.

SunTrust, a regional bank based in Atlanta, began charging a $5 debit card fee on its basic checking accounts this summer. Regions Financial, which is based in Birmingham, Ala., plans to start charging a $4 fee next month.

Chase and Wells Fargo are also testing $3 monthly debit card fees in select markets. Neither bank has said when it will make a final decision on whether to roll out the fee more broadly.

 

“I might use all cash. Or go back to writing checks,” he said.

The debit card fee isn’t the only unwelcome change for checking account customers are seeing either. The banking industry has been raising fees and scaling back on rewards programs as they adjust to new regulations that will limit traditional revenue sources.

Starting Oct. 1, a regulation will cap the fees that banks can collect from merchants whenever customers swipe their debit cards. Those fees generated $19 billion in revenue for banks in 2009, according to the Nilson Report, which tracks the payments industry.

There is no similar cap on the fees that banks can collect from merchants when customers use their credit cards, however. That means banks may increasingly encourage customers to reach for their credit cards, reversing a trend toward debit card usage in the past several years.

An increasing reliance on credit cards would be particularly beneficial for Bank of America, which is a major credit card issuer, notes Bart Narter, a banking analyst with Celent, a consulting firm.

“It’s become a more profitable business, at least in relation to debit cards,” Narter said.

This summer, an Associated Press-GfK poll found that two-thirds of consumers use debit cards more frequently than credit cards. But when asked how they would react if they were charged a $3 monthly debit card fee, 61 percent said they’d find another way to pay.

If the fee were $5, 66 percent said they would also change their payment method.

Bank of America’s debit card fee will be rolled out in stages starting with select states in early 2012. The company would not say which states would be affected first.

Bank of America shares rose 9 cents, or 1.5 percent, to $6.25 in afternoon trading.

h/t to the Blaze

Dodd-Frank: The End Of Free Checking?

On Sat., Oct. 1, new regulations from the Dodd-Frank financial overhaul go into effect on debit cards. Specifically, they impose price controls on “interchange fees,” the fees that banks and credit unions charge to retailers on debit card transactions.

The average interchange fee is about 44 cents. The new rules limit the fees to 21 to 24 cents.

“The costs of processing debit card transactions doesn’t go away because you limit the price,” said John Berlau, director of the Center for Investors and Entrepreneurs at the libertarian Competitive Enterprise Institute. “That shifts the costs to consumers.”

These fees are used by banks to offer free checking and rewards programs. But now those programs may be be coming to an end. Just 45% of noninterest checking accounts are now free, down from 65% last year, according to a recent survey by Bankrate.com. The average monthly fee for those accounts has risen 75% in

the last year to $4.37.

Bank of America (BAC) just announced a $5 monthly fee for debit cards, starting early next year. BofA cited regulatory costs. Wells Fargo (WFC) and Chase (JPM) has experimented with $3 fees in some markets. Earlier in the year, SunTrust (STI) bank ended its debit card reward program.

Berlau notes other consequences:

Much of these costs will be transferred to consumers in terms of loss of free checking and debit card rewards, new charges for using an ATM, and other fee hikes and service cuts. In its rule, the (Federal Reserve) almost invited banks and credit unions to do this, “helpfully” pointing out that “the interchange fee standard would not limit the ability of an issuer to earn revenue from other sources, such as charging fees to cardholders.”

And there may be other nasty surprises, such as job losses. A Wall Street Journal editorial blamed at least part of the 40,000 Bank of America job losses on the loss of revenue due to the Dodd-Frank price controls. And late last week, Texas-based International Bancshares announced that due to the revenue loss from the price controls, it was closing 55 branches in grocery stores and shedding 500 jobs.

Even retailers may not get the full benefit they are expecting. According to one article, debit card processors can charge an additional fee when merchandise is returned, and that fee may not be covered by the regulations. Processors also may charge flat fees on transactions rather than a percentage-based fee, meaning retailers may pay more on small sales. Expect more processors to do that as the regulations take hold.

By David Hogberg   -  Thu., Sept. 29, 2011 11:30 AM ET  -  Capital Hill  -  h/t to Jean Stoner

Related:

The Secret Gov’t Bank That’s Financing More Solyndras

And at the core of this guy’s fiscal policies…

Banks to return $68 billion in bailout money

New York buildings are reflected in the window of a Capital One bank office window. The Treasury Department said Tuesday it will allow 10 of the nation's largest banks to repay $68 billion in government bailout money. (AP File)

Ten of the nation’s biggest financial companies got a green light Tuesday to return $68 billion in federal bailout money — freeing the banks from limits on executive pay and leaving the government with a small gain on the rescue cash.

While the paybacks could be a signal that the banking industry is stabilizing, analysts say it is far from a clean bill of health, and some said it was too soon to let the banks give back the money.

Presidential spokesman Robert Gibbs said the returned money would go “back into general revenue” and could even be used to bail out banks again. (And this seems to be the plan… Many banks have wanted to repay stimulus money before but were not allowed because they weren’t ready… per the administration. But now that people are starting to get fed up and money sources are drying up, they need the money, they will take the pay back and do it all again.

Still, the government has collected $1.8 billion from dividends on shares of preferred stock it received in exchange for bailout money, he said. And the government still holds warrants to buy shares of bank stock at cut-rate prices in the future.

The $68 billion in paybacks would be the largest since the $700 billion Troubled Asset Relief Program took effect eight months ago at the peak of the financial crisis. Specifically, the money comes from a $250 billion slice of the $700 billion bailout package.

Other chunks of the $700 billion will be harder, if not impossible, to recover. Some of it, such as $70 billion funneled to failed insurer American International Group Inc., ended up in the pockets of healthier banks that did deals with AIG.

And even the banks getting out from under the TARP still rely on government support, including debt guarantees from the Federal Deposit Insurance Corp. and credit lines from the Federal Reserve.

The banks chafed under restrictions on executive pay imposed by the government for banks that took bailout cash, arguing they were losing top talent to other firms. The administration is expected to roll out new executive pay rules Wednesday that would apply to banks that still have TARP money.

“It’s our obvious hope that additional money is not going to have to be used to stabilize banks,” Gibbs said. “I certainly wouldn’t rule it out.”

Indeed, banking experts stressed that the payments do not signal an end to the financial crisis. In fact, they say, most banks approved to pay the money back never needed it in the first place.

And three major banks that have not been approved by the government to pay the money back — Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. — could need federal help for years to come.

“When a troubled bank is capable of repaying, that would be significant,” said Barry Ritholtz, head of the financial research firm FusionIQ. “But we’re not going to see that anytime soon because they can’t afford it.”

Among the banks approved to pay back their bailout cash are eight that passed the government “stress test” earlier this year: JPMorgan Chase & Co., American Express Co., Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp. and BB&T Corp.

Those banks had to show they could raise private capital without federal guarantees before getting permission to pay back TARP money.

Morgan Stanley did not pass the test, but got approval to return its bailout money after quickly raising enough capital. And Northern Trust Corp. did not undergo the “stress test” but said it also had received permission to repay its bailout money.

President Barack Obama welcomed the news but said: “This is not a sign that our troubles are over — far from it.”

Indeed, the repayments carry risk. Some say it could create a banking system of winners and losers, with weaker banks stuck with federal restrictions and finding it harder to compete for customers and talent against rivals that operate more freely.

Others say the repayments could conceal problems in the banking industry. Smaller banks are still saddled with billions in risky commercial real estate loans. And large banks still hold the toxic mortgage-backed assets at the heart of the financial crisis.

Paying the government back leaves banks with less protection against future losses, said Christopher Whalen, managing director of the consulting firm Institutional Risk Analytics. And with less capital on hand, they may have to scale back lending.

Other critics said it was dangerous to allow the money to be paid back before the administration overhauls the regulatory framework that governs banks.

“The credit crisis made it clear that the banks acted in irrational and greedy ways. I don’t believe that enough changes have really happened yet,” said Donald Thomas, an independent research analyst.

Adding to the concerns, a report released Tuesday by the congressional panel overseeing the bailout said the hypothetical scenarios used in the “stress tests” might have been too rosy.

That raises the troubling possibility that even raising enough capital to satisfy the government won’t guarantee banks can withstand a deeper recession. And that means the banks might have to seek more federal aid.

Citi and Bank of America, two of the most troubled financial institutions, have taken $45 billion each in bailout money. Wells Fargo said it has not asked for permission to pay back $25 billion in TARP money.

Banking analyst Bert Ely said it could be years before those banks disentangle themselves from the government.

More than 600 banks have received a total of almost $200 billion from the TARP, and 22 smaller banks have already paid the money back. The $1.8 billion in dividend money includes stock the government owned in these smaller banks.

Besides the preferred-stock dividends, the banks that took bailout money issued warrants that give the government the right to buy bank stock at a fixed price later. Bank stocks have been battered but are expected to rise as the economy recovers, so the warrants could deliver substantial profits to taxpayers.

Or the government could sell the warrants back to the banks “at fair market value,” the Treasury Department said — presumably also locking in profits for the taxpayers.

Testifying before a Senate panel, Treasury Secretary Timothy Geithner said the value of the warrants for banks permitted to repay TARP funds are in the “several billion dollar range.”

But it sounds like Secretary Geithner’s understanding might not always be right on…~ Geithner said, after his visit to China that “the Chinese have justifiable confidence in our economy”. Yet other reports, including from Illinois Congressman Kirk, say that China is very uneasy and concerned about the U.S. economy. A telling moment was when a round of laughter broke out as Tim Geithner was speaking in China and said “your investments are secure”; the rudeness of laughing at someone virtually never happens in China. M~

By: Stevenson Jacobs and Daniel Wagner - Associated Press
06/09/09 7:44 PM EDT

This week we will be selling treasury bonds (T-bills). The question is who will buy them… Who wants to luck up their money our future for 30-years? Who buys those bills could make a huge difference in all our lives!

Posted: Daily Thought Pad

Related Articles:

• Reagan Didn't Do It
• House Passes Cash For Clunkers Bill