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View Diary: Closely-Watched Court Decision Breaks Bad for Wall St. Has A Day of Reckoning Arrived? (154 comments)

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  •  Not enough money in the world to cover (2+ / 0-)
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    cotterperson, Paper Cup

    if this holds for the TBTFs.  Which is why it will never happen.

    •  Bernanke runs the presses night and day and (6+ / 0-)

      day and night at the Federal spackle factory, manufacturing enough spackle to try to hold the structures together before any sizable gust blows them over.

      Look, this is for real. The banks get free money from the Fed. They buy US Bonds with it on which they earn interest. We give them free money and then pay them interest when they loan it back to us. This is a part of how they are recapitalizing

      Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What's more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets.  Which means the banks can turn relatively small amounts of equity into huge profits--by borrowing from the taxpayer and then lending back to the taxpayer.

      Read more:

      And here is more confirmation
      A newly-released study from the Congressional Research Service bolsters claims that the nation's largest banks profited off the Federal Reserve's financial crisis-era programs by borrowing cash for next to nothing, then lending it back to the federal government at substantially higher rates.

      The report reinforces long-held beliefs that the banking system in essence engaged in taxpayer-financed arbitrage: They got money for free, then lent it back to Uncle Sam while collecting juicy returns. Left out of the equation are the millions of everyday borrowers, like households and small businesses, who were unable to secure loans needed to tide them over until the crisis ended.

      “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR

      by Phoebe Loosinhouse on Wed Feb 06, 2013 at 08:55:32 AM PST

      [ Parent ]

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