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View Diary: Federal Reserve Made $1.2 Trillion In Secret Loans During 2008 Financial Crisis (15 comments)

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  •  Basically, we had a credit freeze because (1+ / 0-)
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    jamess

    no bank knew how to value its own assets let alone any other bank's, and there truly was a problem with many of the underlying assets (such as mortgage backed securities).  Derivatives made the whole mess even more complicated because there was no transparent market for them, so nobody knew what any particular bank's real situation was.  This money gave the banks the ability to say to other banks that they were not insolvent.  It got money moving (slowly) through the system.  At least that was probably the theory.

    However, some of these banks (including those who rushed to become banks, like Goldman Sachs), undoubtedly used this money to make more money.  And some of those banks probably should have been allowed to fail.

    And, HoundDog is right - the magnitude of the loans is striking.

    Hey, Republicans, the whole world is watching.

    by TAH from SLC on Tue Aug 23, 2011 at 11:28:14 AM PDT

    [ Parent ]

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