The Fed Audit

[ElNono]

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.

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

Link to the GAO report:
http://sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf

[ElNono]

Counterpoint:
http://finance.fortune.cnn.com/2011/07/08/surprise-the-big-bad-bailout-is-paying-off/

[Winehole23]

Holding up TARP as a moneymaker is a bit misleading in the context of $16T in secret loans.

[Winehole23]

Holy fuck.

[ElNono]

I had no idea that the TARP was only 3% of the bailout. That's a lot of dough.

[RandomGuy]

250 pages or so, not couting the BS at the end. Have to wait until the weekend to read. Fascinating skimming though. Gotta get going.

[RandomGuy]

Figure 26 illustrates a typical swap line transaction, in which FRBNY
exchanged dollars for the foreign central bank’s currency at the prevailing
exchange rate and the foreign central bank agreed to buy back its
currency (to “unwind” the exchange) at this same exchange rate at an
agreed upon future date. The foreign central bank would then lend the
dollars to banks in its jurisdiction. Foreign central banks assumed the risk
of losses on these dollar loans and paid FRBNY the interest collected on
these loans. FRBNY did not pay interest on the foreign currency it
received under the swap lines. To avoid difficulties that could arise for
foreign central banks in managing the level of their currency reserves,
FRBNY agreed not to lend or invest the foreign currency.

The majority of the money in these programs appear, to my quick reading to be under a dollar swap (short short term liquidity) and most of that to one entity, the European Central Bank, which racked up about $8T

Not sure what they base the 16T figure on though, but I would guess that is part of it.

FWIW.

(edit)
Note, this is not one big loan, but a series of short term smaller loans, I think. Still reading, but this kind of smaller activity isn't quite as bad/risky as massive loans. Looks bigger than it was at any one time.

[boutons_deux]

posted already:

http://www.spurstalk.com/forums/showthread.php?t=181967

[ElNono]

posted already:
http://www.spurstalk.com/forums/showthread.php?t=181967

Sorry.

[Winehole23]

The majority of the money in these programs appear, to my quick reading to be under a dollar swap (short short term liquidity) and most of that to one entity, the European Central Bank, which racked up about $8T. Massive foreign aid.

[Winehole23]

It really is getting to be like the old joke that the international monetary system is a gang of guys staggering home drunk from the bar. They're all pretty woozy, they're all holding each other up, and they'll all be fine...as long as nobody falls down.

[Winehole23]

(drinkin, not thinkin)

[Winehole23]

Some background:

http://www.bloomberg.com/news/2011-03-21/fed-must-release-bank-loan-data-as-high-court-rejects-appeal.html

[greyforest]

exponential growth is a bitch

[boutons_deux]

Unregulated capitalism is a wonder to behold.

That's why the Banksters have paid the Repugs $30M in a year to kill the CFPB as "overreaching". $30M? that's well below the roundoff error in the financial sector.

[Winehole23]

bump.

still mind blowing, and but for Bloomberg's lawsuit, would still be a secret.

[Winehole23]

interesting discussion of the revealed figures here:

http://www.econbrowser.com/archives/2011/12/more_on_those_s.html

[Winehole23]

http://www.econbrowser.com/archives/2011/12/777_trillion_in.html#more

[EVAY]

interesting discussion of the revealed figures here:

http://www.econbrowser.com/archives/2011/12/more_on_those_s.html

WH, I read some but not all of this. Will get back to it tomorrow, but one takeaway that I think I got is that the Prof's analysis of what the Fed was doing in 7.7T number is flawed inasmuch as it implies that the loans are all that money at the same time and never repaid. But that if fact, the 7.7 number is a total of smaller numbers being loaned and repaid over and over a period of time.

Did I understand the econbrowser thing correctly?

[Jacob1983]

America is fucked.

[Winehole23]

America is fucked.
My takeaway is that the bottom line is wrong by at least a factor of five. $1.5T is still a real amount of money, though.

[Winehole23]

leaving wholly to one side, naturally, the $8T or so offered abroad, which for all I know may be a figure similarly flawed. even still, $2T is a real amount of money, and the terms were outrageously easy imho.

[Winehole23]

the lender of last resort did not inflict the customary penalty rates for usage, so as to discourage the use.

[Winehole23]

the apt time-value of money teaching unit, would be apropos I think. I do not possess it.

[Winehole23]

regardless, we're all socialists now

[Winehole23]

the risk of billionaires and multibillionaires, and a ton of ordinary people, got socialized

[Winehole23]

money was lent furtively and monumentally, on historically lenient terms

[Winehole23]

it will likely happen again before too long