The con of the century – Federal Reserve made $9 trillion in short-term loans to only 18 financial institutions. Since 2000 the US dollar has fallen by 33 percent. The hidden cost of the bailouts.

The Federal Reserve released a stunning report showing the details of bailouts that occurred during the peak of the credit crisis.  They won’t call it “bailouts” but giving money when others won’t is exactly that.  What the report shows is that the Fed operated as a global pawnshop taking in practically anything the banks had for collateral.  What is even more disturbing is that the Federal Reserve did not enact any punitive charges to these borrowers so you had banks like Goldman Sachs utilizing the crisis to siphon off cheap collateral.  The Fed is quick to point out that “taxpayers were fully protected” but mention little of the destruction they have caused to the US dollar.  This is a hidden cost to Americans and it also didn’t help that they were the fuel that set off the biggest global housing bubble ever witnessed by humanity.  A total of $9 trillion in short-term loans were made to 18 financial institutions.  Still think the banking bailout didn’t happen or cost us nothing?  Let us first look at the explosion of assets on the Fed balance sheet.

The Fed is still carrying longer term debt on its books that shouldn’t be there:

federal reserve assets

The Fed typically would carry under $900 billion in high quality government Treasuries on its balance sheet.  But today it is carrying roughly $2.4 trillion in “assets” and the biggest part of this is made up of questionable mortgages:

federal reserve balance sheet

Over $1 trillion of mortgage backed securities sit on the Fed balance sheet and QE2 is only starting.  Other tens of billions of dollars are sitting in the balance sheet as well that include failed commercial real estate projects and defunct shopping centers around the country. Of course the Fed would like to give the appearance that all is well but no one makes $9 trillion in short-term loans without undergoing serious problems.  And doesn’t it bother the public that an institution that represents our banking system essentially bailed out the world at the expense of US taxpayers (without asking by the way) and now taxpayers are having to deal with a toxic banking system and a jobs market that is hammered into the ground?

This concern was raised:

“(NY Times) But Senator Bernard Sanders, independent of Vermont, who wrote a provision in the law requiring the disclosures by Dec. 1, reached a different conclusion.

“After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed’s multitrillion-dollar bailout of Wall Street and corporate America,” he said. “Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations.”

Senator Sanders is absolutely right.  Did you also know that billions of dollars went to foreign central banks as well?  We all know the issues going on with the European Zone today but the Fed never mentioned this during the bailout frenzy.  Don’t be fooled when the Fed says there is no cost associated.  26 million Americans are unemployed or underemployed and 44 million Americans are on food assistance.  The US dollar has done the following in the last decade:

us dollar index

Yet this is the response:

“In a statement accompanying the disclosure, the Fed said it had fully protected taxpayers. “The Federal Reserve followed sound risk-management practices in administering all of these programs, incurred no credit losses on programs that have been wound down, and expects to incur no credit losses on the few remaining programs,” it said.”

Sound risk-management?  The entire purpose is to destroy the currency in a slow methodical process and inflate away the debt.  Yet there is a cost to this born by the many for the few.  Over the last decade it has meant the depreciation of the dollar by 33 percent.  That is a real cost.  It might not be a big deal if you hold money in foreign countries but most Americans only have a paycheck that is issued in US dollars.  The actual amount of Fed loans is simply jaw dropping:

“At home, from March 2008 to May 2009, the Fed extended a cumulative total of nearly $9 trillion in short-term loans to 18 financial institutions under a credit program.

Previously, the Fed had only revealed that four financial firms had tapped the special lending program, and did not reveal their identities or the loan amounts.

The data appeared to confirm that Citigroup, Merrill Lynch and Morgan Stanley were under severe strain after the collapse of Lehman Brothers in September 2008. All three tapped the program on more than 100 occasions.”

Keep in mind that unemployment insurance will cost roughly $4 billion per month and most of this money will go back into the economy.  Congress is stalling on this yet the media is completely silent on the $9 trillion in Federal Reserve loans?  This should be the headline story over and over until people realize how big the bailout was (and how this false dichotomy is being used as propaganda in the media as if $4 billion a month is going to bankrupt the system).  The banking elites just want to shift the blame to “poor” people while ignoring the elephant in the room which are the trillions of dollars in Fed loans.

Everyone got in the game:

“Big institutional investors, like Pimco, T. Rowe Price and BlackRock, borrowed from the TALF program. So did the California Public Employees Retirement System, the nation’s largest public pension fund, and several insurers and university endowments.”

biggest issuers of debt federal reserve bought

Source:  New York Times

Every big player got into this and you will recall the rhetoric that it was for small businesses and the American consumer.  None of that happened.  Banks are still sitting on incredibly large excess reserves:

excess reserves

The Fed is operating without any checks and balances from Congress and another trillion dollar exposure has come out with the mainstream media channels like ABC, CBS, and NBC all remaining silent.  Can’t interrupt Wheel of Fortune right?

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9 Comments on this post


  1. Michael Rivero said:

    That isn’t “cheap collateral” the Fed is buying from the foreign banks. The Fed is being forced to buy back all those fraudulent mortgage-backed securities Wall Street Peddled across the globe a few years back. That is WHY the Federal Reserve kept secret who was getting all that cash until the change in law forced them to make the list public.


    December 3rd, 2010 at 9:50 am
  2. Jon McIntyre said:

    The funny thing is you mention ABC, NBC, and CBS as all remaining silent. Is this to imply that Fox is somehow thoughtfully educating is viewers as to the methods being employed by the banking elite and a captured congress to extract the wealth of the middle class? The only person I hear talking about the nuts and bolts of the extraction and how it is taking place is Dylan Ratigan and he appears on MSNBC at 4pm weekdays. Frankly I do not understand how he is allowed to speak forcefully and honestly about the banking extraction as his parent company is GE but none the less, I see nobody speaking so honestly and with such clarity about the theft that is taking place. He definitely deserves honorable mention for trying to educated the American people, even though we have been brainwashed into not wanting to know the cold hard truth about anything. Most of us would rather be lied to and riled up in anger with sensationalistic right versus left bull crap, sold to us as news or valuable commentary.

    December 3rd, 2010 at 10:31 am
  3. robertsgt40 said:

    “Keep in mind that unemployment insurance will cost roughly $4 billion per month and most of this money will go back into the economy.”—- That is still “borrowed money. You can’t borrow/spend your way out of debt…unless your the fed

    December 3rd, 2010 at 1:50 pm
  4. robertsgt40 said:

    BTW, those huge bank reserves will come in handy when it’s time to purchase/harvest the capital as it sits on the courthouse steps for pennies on the dollar. Deja vu 1930s except this time the buzzards are going for the whole enchalada(US)

    December 3rd, 2010 at 1:57 pm
  5. tyler said:

    To bad the neocon corporate slaves like john boener bow down to their corporate masters and are not letting ron paul get to chair the committe over seeing the fed. ron paul has twenty five years of seniority but that doesn’t matter to these greasy dirt balls.

    December 3rd, 2010 at 10:37 pm
  6. Chris Hamilton said:

    I read far too much and too often regarding the road we are on…I’m not a doomer but simply a realist (which feels a lot like a doomer nowadays). Anyway, I really enjoy and appreciate your work. It is clear and well thought through. You show no need for hyperbole or overplaying your hand. The math behind this multivariate debt driven situations are dire enough and folks are welcome to draw their own conclusions.

    If you ever get a chance (and you likely have done this before) is always great to personalize the debt and unfunded liabilities of our nation, states, muni’s, etc. What it will cost every US taxpayer simply to pay the interest on the debt (in perpetuity) and suggest what it would look like to fund the “unfunded” (ie, 111million US taxpayers paying down $111T unfunded over a 20, 30, or 50 year period (0% interest rate…just like a interest free mortgage). Take out the 20% or so paid by corps…and then lastly show it on a per taxpayer / per month basis.

    I don’t believe we’d ever pay this off as it’s too massive but I guess that’s the point. We have to start deciding which corporate handouts are getting cut and which goverment spending to be cut…and then we decide the remaining delta for taxpayers to fund.

    My 2 cents in attempting to shake Americans from their coma.

    Thanks again and best holiday wishes

    December 5th, 2010 at 1:51 am
  7. john peppers said:

    I am in the “being educated” phase – this info, in summary: Educates me to the fact that there is a whole lot of many connected things affecting both US and gobal financial health status. At the core heart of US financial crises. There exist the operation of the Fed out of control and operating without oversight and monitoring by Congress. I realize that Congress monitoring brings “political” endangerments into Fed operations. But lack of “3rd party” oversight monitoring has corrupted the Fed to the point. That it seems now the Fed exist for sole purpose of enriching and maintaing the few at the expense of the common many. I am bothered too by the fact that news media seems to think that this kind of info isn’t news worthy. Or else it isn’t being reportrf to the general public because its revelation and knowledge grasp by the general public. Would throw a monkey wrench into the course directions of many political agenda items we seem held hostage taken by various political agenda persons and groups today.

    December 5th, 2010 at 2:46 am
  8. Factsnews said:

    “Congress is stalling on this yet the media is completely silent on the $9 trillion in Federal Reserve loans? This should be the headline story over and over until people realize how big the bailout was…”

    THAT is the problem, millions of Americans relying on big media companies for their information…and BELIEVING THEM!!!

    December 5th, 2010 at 9:29 am
  9. JeremiadJones said:

    Would someone please explain to me the mechanism by which the Fed, a private bank, taps the taxpayer for funding? I understand how Fed monetary policy influences the value of the dollar, but devaluation of the currency is not a taxpayer issue, per se; it is an issue affecting all holders of dollars, foreign and domestic. But so far as I know, whatever the Fed does with its balance sheet it can make no direct claim on US taxpayers. True?

    December 30th, 2010 at 7:08 am


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