Have You Heard About The 16 Trillion Dollar Bailout The Federal Reserve Handed…More Dots Connected On Fed And It’s Sacking Of American Taxpayers
by Rex Dexter
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?
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. [http://www.scribd.com/doc/60553686/GAO-Fed-Investigation#outer_page_144]
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. [http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&idim=country:USA&dl=en&hl=en&q=gdp+of+the+united+states]
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.
A recent Bloomberg article made the following statement: http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html
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.
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: http://mobile.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
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 (http://www.scribd.com/doc/60553686/GAO-Fed-Investigation#outer_page_144), $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: http://www.scribd.com/doc/60553686/GAO-Fed-Investigation#outer_page_144
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. [http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3 – Now You Know A BIG REASON He’s Been Co-opted…]
The following is an excerpt from a statement about this audit that was taken from the official website of Senator Sanders: http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
“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 (http://www.scribd.com/doc/60553686/GAO-Fed-Investigation), 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. [http://thehill.com/blogs/on-the-money/801-economy/172727-gao-audit-opens-fed-to-fresh-criticism]
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. [http://www.rawstory.com/rs/2011/07/21/audit-fed-gave-16-trillion-in-emergency-loans/]
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 (http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html), the big banks brought in an estimated $13 billion by taking advantage of the Fed’s below-market rates: http://mobile.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
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. [http://www.dailymail.co.uk/news/article-2067359/Revealed-The-secret-1-2-TRILLION-bailout-given-banks.html?ito=feeds-newsxml]
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: http://www.youtube.com/watch?feature=player_embedded&v=Gr-TCYETQ84
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.
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.
The Big Bank Bailout
Mike Collins | July 14, 2015
Most people think that the big bank bailout was the $700 billion that the treasury department used to save the banks during the financial crash in September of 2008.
But this is a long way from the truth because the bailout is still ongoing.
The Special Inspector General for TARP summary of the bailout says that the total commitment of government is $16.8 trillion dollars with the $4.6 trillion already paid out.
Yes, it was trillions not billions and the banks are now larger and still too big to fail.
But it isn’t just the government bailout money that tells the story of the bailout.
This is a story about lies, cheating, and a multi-faceted corruption which was often criminal.
• Rating agencies- Rating agencies like Standard and Poor’s are paid by the banks (which is a conflict of interest) and have a huge influence on the ratings of securities.
During the housing bubble ratings agencies continued to give triple AAA ratings to toxic mortgages.
The justice department wants $5 billion in restitution from Standard and Poor’s for its part in falsifying ratings.
• Money laundering – It has been proven that the American Division of the HSBC bank did money laundering for Mexican drug cartels to the tune of $881 billion according to the Justice Department.
The penalty to this bank for blatant corruption was $1.9 billion and the New York Times laments that HSBC was too big to indict.
Nobody goes to jail at a time when an unemployed black person gets 10 years for robbing a minute mart.
• Betting Against – Both JP Morgan Chase and Goldman Sachs worked with hedge funds to bet against the toxic mortgages after the crash had started.
They made money by selling short on the financial catastrophe they had created.
JP Morgan was fined $296.9 million and Goldman Sachs was fined $550 million for actions
• Insider Trading –The jailed billionaire Raj Rajartmn made nearly $One million a minute by getting inside information from Goldman Schs.
The New York attorney has fingered 70 hedge funds but the prosecution is very slow.
The operating principles of the big banks is a cesspool of greed, ethics and criminal intent and they give a very bad name to free market capitalism.
During the housing bubble Wall street was considered the heart and soul of free market capitalism, but when they were in danger of total collapse they fell on their knees as socialists, begging the government and tax payers to bail them out
Many people have asked why the government bailed them out. Isn’t capitalism designed to get rid of the weak and the failed; so why didn’t we just let them fail?
The answer was that they were too big to fail and allowing them to fail could have created a worldwide depression.
In fact, in a meeting with Congress on September 18th, 2008. Treasury Secretary Paulson told the members that $5.5 trillion in wealth could disappear by 2 pm of that day.
In a meeting with Senator Sherrod Brown, Secretary Paulson and Federal Reserve Chairman Ben Bernanke said, “we need $700 billion and we need it in 3 days.”
So how did this all happen?
1933 – The Glass –Stiegel Act regulated interest rates, established deposit insurance, and erected a wall between commercial and investment banking by restricting the former from engaging in non-banking activities like securities and insurance.
1978 – A successful legal challenge to the state usury laws and the massive promotion of credit cards by the banks led to dramatic growth of credit card debt by consumers.
1979 – Pension regulation was loosened which created a new market for speculation and the capital to feed it.
1980 – Investors fled conventional interest bearing accounts to alternatives such as money market, venture capital and hedge funds which were lightly regulated.
1982- Congress passed the Garn-St. Germaine Depository Institution Act which deregulated the Savings and Loan industry.
This led to speculation with other people’s money and a crisis which would cost the taxpayer $201 billion.
The deregulation of interest rates at conventional banks also led to elimination of bank net-worth, accounting standards, and loan to value ratio requirements.
1999-Republican Phil Gramm successfully led the effort that repealed most of the Glass-Stiegel Act, which was a depression era law that kept Commercial Banking and Investment separated.
2000- Only a year later Gramm inserted the new Commodity Futures Modernization Act into a must pass budget bill that rocketed through the Congress.
One part of this bill would prohibit the regulation of Derivatives which allowed finance gurus to leverage and speculate with other people’s money.
By using derivatives, credit default swaps and other unregulated financial instruments the big banks were able to chop up and resell loans and mortgages as repackaged securities or derivatives.
The new securitization became globalized and eventually affected the world economy
After the creation of new financial tools (like credit default swaps and derivatives) as well as more access to everybody’s money; the banks began to do high risk gambling just like a big casino.
The new financial tools were backed by the government so that taxpayers would get hung with the bill.
2007 – The speculation and lack of effective regulation eventually led to the crash of 2007 and The Great Recession.
The industry is not afraid to do it again because they know no one goes to jail and the government will bail them out.
Why didn’t more people know that the bailout had climbed into the trillions?
In an article Secrets and Lies of the Bailout, Matt Taibbi says “It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people.
We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe.
What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyper concentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it.
After the original $700 billion bailout, the ongoing bailout was kept very secret because Chairman Ben Bernanke, argued that revealing borrower details would create a stigma — investors and counter-parties would shun firms that used the central bank as lender of last resort.
In fact, $7.7 trillion of the secret emergency lending was only disclosed to the public after Congress forced a one-time audit of the Federal Reserve in November of 2011.
After the audit the public found out the bailout was in trillions not billions; and that there were no requirements attached to the bailout money – the banks could use it for any purpose.
The big got even bigger. [http://www.forbes.com/sites/mikecollins/2015/07/14/the-big-bank-bailout/#35e258133723]
Guess WHO Bails Them Out NOW?
Bank Deposit Bail In Law Is Biggest Threat To Average USA & G20 Savers – By Investment Watch – Mar 29, 2016
The FDIC is no longer just an insurance agency, but the primary executor for the bail-in process
If you ask any number of Americans to tell you if they believe their bank accounts are protected, a modicum of the group will reply that the Federal Deposit Insurance Corporation (FDIC) backstops their money and accounts up to $250,000.
However, if you push the envelope a little further and ask them if the FDIC has any other function, they will stare blankly at you and perhaps mumble that they are simply another government agency with only one specific purpose.
This however is no longer true, and in fact, the FDIC has taken on a much larger role.
Back in 2012, the FDIC met with the Bank of England in a joint conference to hash out the framework for bail-in procedures should not only banks go insolvent, but also should there be a sovereign debt default in the wake of a financial collapse. [https://www.fdic.gov/about/srac/2012/gsifi.pdf]
And perhaps most importantly for the common man and individual, the FDIC now has the power to write down your account without ever having to compensate you through promised insurance as they were required by law prior to this conference, and the passage of Dodd-Frank.
“Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve SIFIs [systemically important financial institutions] by establishing the orderly liquidation authority (OLA). Under the OLA, the FDIC may be appointed receiver for any U.S. financial company that meets specified criteria, including being in default or in danger of default, and whose resolution under the U.S. Bankruptcy Code (or other relevant insolvency process) would likely create systemic instability.
[In the US] Title II requires that the losses of any financial company placed into receivership will not be borne by taxpayers, but by common and preferred stockholders, debt holders, and other unsecured creditors, and that management responsible for the condition of the financial company will be replaced.
[In the UK] The introduction of a statutory bail-in resolution tool (the power to write down or convert into equity the liabilities of a failing firm) under the RRD is critical to implementing a whole group resolution of U.K… But insofar as a bail-in provides for continuity in operations and preserves value losses to a deposit guarantee scheme in a bail-in should be much lower than in liquidation. Insured depositors themselves would remain unaffected. Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down.
So… if a large bank fails in the US, the FDIC steps in and takes over, replacing management, and works to shrink the bank by writing-down liabilities and converting debt into equity.
In other words… any liability at the bank is in danger of being written-down should the bank fail.
And guess what?
Deposits are considered liabilities according to US Banking Law and depositors are creditors.