Blockbuster story from Bloomberg - NEW DOCS: Secret Fed Loans Gave Banks Undisclosed $13B

[kpete]

Secret Fed Loans Gave Banks Undisclosed $13B

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.

A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.

......................

MORE (Holy Cow):
http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

they buried the lede in the 8th paragraph:
"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."

[xchrom]

1. recommend

[dipsydoodle]

2. K & R

.

[1monster]

3. K&R

[piratefish08]

4. kick

[RainDog]

5. k&r n/t

[Norrin Radd]

6. kr

[enough]

7. k&r (nt)

[SpiralHawk]

8. "Good old-fashioned Republicon occultism. Smirk." - xCommander AWOL Bush (R)

[SpiralHawk]

10. "Smirk." - Bennie B. (1%)

[banned from Kos]

9. down from $16 trillion to only $13 billion - looking good!

And that $13 billion was in lost opportunity on below market interest rates - not an actual handout.

[enough]

11. The secrecy paid off.

Snip from the article>

Lawmakers knew none of this.

They had no clue that one bank, 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.

snip>

Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.

snip>

If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks.

Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking. “Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.

more>

[banned from Kos]

13. If they post the collateral they can borrow all they want - that is the law

and has been since 1913.

[cyglet]

14. Oh? What collateral? n/t

[banned from Kos]

15. Bonds. That is the reason Lehman failed - no collateral.

Of course at the time they didn't have discount window privileges. So Paulson made sure Goldman and Morgan Stanley got such right away.

[Bluenorthwest]

16. What collateral was posted in this case?

nt

[enough]

17. The immediate question here is not the legality of it, but the fact that they misled

everyone about the actual state of things, which in turn affected the response.

[cyglet]

12. Why should I be suprised?

And they still don't pay out good interest rates (the 3rd bailout).

"But we can't tell the shareholders the truth..."

[indepat]

18. The pervasiveness of the corruption and the utter contempt for the public are

breathtaking. :patriot:

[cyglet]

24. Yet not really overly suprising

:eyes:

[Huey P. Long]

19. Goldman Sachs 'owns' the world.

[Arugula Latte]

20. W.T.F.

Is it fascism yet?

[Cowpunk]

21. “We’re absolutely, totally, 100 percent not prepared for another financial crisis.”

With Europe on the brink of calamity, might this be a problem?

[WillyT]

22. K & R !!!

:kick:

[Octafish]

23. Gosh. Sounds like a case of friends helping friends.

In Washington and on Wall Street, they do it all the time. It's how deals get done, baby.

Were the average citizen-consumer to do that, it'd be called a corrupt practice. And he'd be in jail.