Very simply, the very notion that taxpayers are making a profit on the Wall Street bailouts is pure unadulterated bulls**t. It simply isn't true. It is a meme fabricated by the status quo and furthered by its minions and true believers, even right here in this community. The concept that taxpayers will ever be repaid for these tithes to our nation's power elite is just as far-fetched.
As Wall Street pundit Barry Ritholtz noted, just two months ago:
Pro Publica has been maintaining a list of bailout recipients, updating the amount lent versus what was repaid.
So far, 938 Recipients have had $607,822,512,238 dollars committed to them, with $553,918,968,267 disbursed. Of that $554b disbursed, less than half -- $220,782,546,084 -- has been returned.
Whenever you hear pronunciations of how much money the TARP is making, check back and look at this list. It shows the TARP is deeply underwater.
I just checked the list, which is regularly updated over at the (Pulitzer Prize-winning) ProPublica website, and as of tonight, Wall Street's $322,144,764,732 (keep the change) in the hole to Main Street as you read this. If Ritholtz' commentary was written with today's numbers in place of the numbers he posted 60 days ago, it'd read:
So far, 938 Recipients have had $615,944,506,423 dollars committed to them, with $560,459,325,504 disbursed. Of that $560b disbursed, less than half -- $238,314,560,772 -- has been returned.
But, that only begins to scratch the surface of the real story(ies). (You know...the truth? This is a reality-based community, right?)
The list, linked above (and the huge sums on it), does not even include the Federal Reserve's emergency loan programs to Wall Street. ProPublica provides us with a separate Federal Reserve list and accounting for those funds.
Here's more on this from Dean Baker: "TARP Repayment and Legalized Counterfeiting."
Now, about those government guarantees, backstops and stealthier payments...bailouts that aren't even acknowledged as such...
As I've noted in recent diaries, the Wall Street too-big-to-fail ("TBTF") banks, starting with Bank of America, are now receiving more government commitments and backstops, going forward, to bail them out of the mortgage/foreclosure fraud fiasco--another Wall Street creation typifying the status quo's successful, ongoing efforts to privatize their profits while they socialize their losses among the unwashed masses.
Then again, fellow Kossack gjohnsit told us all about "The most expensive bailout of all, and no one is talking about it," last March.
And, as I noted in my post on Friday, "Endgame," a proposal is very quickly gaining serious momentum in Washington D.C. to turn the mortgage arms of virtually every major Wall Street bank into government-sponsored enterprises ("GSE's"), much like Fannie Mae and Freddie Mac, et al, are now. (Fannie and Freddie have, jointly, received over $150 billion in government/taxpayer subsidies in the past 28 months, give or take...come to think of it, scratch the "give," leave the "take.") This would amount to--by far and away--the biggest government/taxpayer backstop/commitment of all.
(h/t to blogger George Washington)
But, let's take a moment to look at some of the more stealthy bailouts that have occurred over the past 30 months, with many/most of them still in place, today. (Yes, the bailouts still continue...even if they're not called "bailouts.") Let me count just a few of the ways (and this is just a partial list):
Here's Bloomberg explaining, last May, how the TBTF's have massively benefitted (scores of billions of dollars over the past 24 months, alone) from guaranteed profits on trading spreads. Contrary to what one Kossack stated over the past day, this isn't about lending money for crappy collateral (that's another story, altogether); this is about the Federal Reserve lending money at less than 1% to the TBTF's, wherein the TBTF's turn around and buy securities and government paper with guaranteed yields of 2%, 3% and more.
There's the Wall Street Journal and blogger George Washington telling us of just a couple of the special tax benefits provided to the TBTF's to facilitate "emergency mergers"--mergers where the TBTF's netted billions--during the mortgage meltdown.
Read another post from Bloomberg on the Treasury Department-funded Public-Private Investment Program ("PPIP"), which many economic pundits tell us was merely just another bogusly-packaged scam to dispose of toxic bank assets on the backs of taxpayers for the benefit of invited members of the status quo. And, adding insult to injury, it actually enabled some TBTF's to increase their holdings of mark-to-make-believe crap, not decrease them.
And, of course, there's all of those sovereign bailouts we're reading about, nowadays. Here's Bloomberg, again explaining how the TBTF's are benefitting in a big way from those efforts, too.
As well as what may be the most publicized stealthy bailout of all, from Shahien Nasiripour at HuffPo: "Goldman Sachs Got Billions From AIG For Its Own Account, Crisis Panel Finds."
...Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.
The fact that a significant slice of the proceeds secured by Goldman through the AIG bailout landed in its own account--as opposed to those of its clients or business partners-- has not been previously disclosed. These details about the workings of the controversial AIG bailout, which eventually swelled to $182 billion, are among the more eye-catching revelations in the report to be released Thursday by the bipartisan Financial Crisis Inquiry Commission...
And those totally false statements you might have read over the past few days of how the banks had to "pay" for the privilege of disposing of their trash over the past three years at the public garbage collection point known as the Federal Reserve? That, in and of itself, is a truly false claim once you realize the Fed--even under court order to disclose the specifics of these transactions--thumbed it's nose at the U.S. taxpayer (even then). From Naked Capitalism Publisher Yves Smith, on December 2nd (just over two months ago): "Fed Thumbs Its Nose at Audit the Fed; Withholds Data Required on $885 Billion of Collateral."
Fed Thumbs Its Nose at Audit the Fed; Withholds Data Required on $885 Billion of Collateral
Thursday, December 2, 2010
Well, even under the compulsion of law, the Fed chooses not to comply. Should we be surprised that it continues to refuse to make mandated disclosures?
In this case, as reported by Bloomberg, the Fed has withheld information that was of the collateral posted by borrowers to secure $885 billion of loans. Without this information, it is impossible to ascertain the risks undertaken in various emergency facilities. Dodd Frank specifically requires this detail be released: the relevant language is boldfaced:
(c) PUBLICATION OF BOARD ACTIONS.--Notwithstanding any other provision of law, the Board of Governors shall publish on its website, not later than December 1, 2010, with respect to all loans and other financial assistance provided during the period beginning on December 1, 2007 and ending on the date of enactment of this Act under the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Term Asset-Backed Securities Loan Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility, the Term Securities Lending Facility, the Term Auction Facility, Maiden Lane, Maiden Lane II, Maiden Lane III, the agency Mortgage-Backed Securities pro- gram, foreign currency liquidity swap lines, and any other program created as a result of section 13(3) of the Federal Reserve Act (as so designated by this title)--
(1) the identity of each business, individual, entity, or foreign central bank to which the Board of Governors or a Federal reserve bank has provided such assistance;
(2) the type of financial assistance provided to that business, individual, entity, or foreign central bank;
(3) the value or amount of that financial assistance;
(4) the date on which the financial assistance was provided;
(5) the specific terms of any repayment expected, including
the repayment time period, interest charges, collateral, limitations on executive compensation or dividends, and other material terms; and
(6) the specific rationale for each such facility or program
In other words, there is no way to pretend that this information was not part of the stipulated disclosure. The terms of the various types of support extended are to be revealed by borrower, in particular the details of the various types of support extended, including the collateral posted. Instead, the Fed provided the data on an aggregated basis, by asset type and rating and then only for three of six facilities.So what is the Fed trying to hide?
A number of experts correctly pointed out that this is inadequate:
"This is a half-step," said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. "If you were going to audit the facilities, then would this enable you to do an audit? The answer is `No,' you would have to go in and look at the individual amounts of collateral and how it was broken down to do that. And that is the spirit of what the requirements were in Dodd-Frank."...
It is "specifically impossible" to know how much risk taxpayers were taking by looking at pools of collateral grouped by asset class and rating, said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of "Elements of Structured Finance," published in May by Oxford University Press.
"I need to know the individual composition because a $2 billion pool can be one asset of $2 billion, which would be very risky, or 2,000 assets of $1 million each, and that's not risky at all," Raynes said. "The spirit of Dodd-Frank was not respected, and they used the vagueness in the wording of the law to weasel out of fulfilling their duty to the American people."
One expert argued that the data needed to be withheld because it might spur bank runs. This is simply barmy. These loans took place during the crisis; this exercise is about past, not current exposures. And the Treasury has given all the TARP banks clean bills of health. There's no risk here, save to the Fed's reputation and its secrecy.
So, we now have Kossacks--apparently people in our community "know facts" that not even the most senior elected officials in D.C. are privy to--telling us (sorry, no links; I'm not going to call out anyone, directly) that the banks didn't profit from all of this chicanery, while the Federal Reserve has openly defied court orders regarding disclosure, to the tune of $885 billion in assets. We're told by these diarist's that this was all "AAA" collateral.
LOL! And, I'm laughing because based upon facts and documentation that we do know (now), the truth is that the banks got away with wholesale abuses of the system. From the NY Times: "How Banks Pawned Junk to the Fed."
How Banks Pawned Junk to the Fed
By BEN PROTESS
December 2, 2010 2:01PM
...The Central Bank's program, known as the Primary Dealer Credit Facility, was a cheap overnight loan system for banks that was similar to the Fed's discount window.
The Fed originally restricted collateral to investment-grade bonds. But the fall of Lehman lowered its expectations, and the banks wasted no time responding.
The day after Lehman's collapse JPMorgan, Goldman Sachs, Citigroup and Morgan Stanley collectively pledged more than $100 million in collateral that was rated Triple-c or below.
On a $4 billion loan that day, Morgan Stanley posted $32 million in junk-rated collateral. The week after, Bank of America started pledging junk and never looked back. Nearly all of Bank of America's loans through the Fed program were at least partly collateralized by low-rated assets.
And as time went on, banks found it cheaper -- and easier -- to borrow...
Here's more on this from Pulitzer Prize-winning NY Times columnist Gretchen Morgenson, also from just a couple of months ago: "So That's Where the Money Went."
Also checkout a recent post by economist Dean Baker, linked here: "The Big Bank Theory: How government helps financial giants get richer."
Well, of course, the pretzel logic being deployed here is thus: the TBTF's took on greater and greater risks throughout the past decade, with the tacit understanding that if they screwed the pooch, the government would step in and bail them out with taxpayer money. In 2008, that is what happened. And, in 2011, it is happening, still. So, to prevent the banks from behaving badly in the future, we are now providing them with even greater support and more formalized/institutionalized guarantees...so...so...they won't do it again?
Well, that's just peachy. I can't wait to read diaries here in coming months and years about all the profits we'll be making then. Damn! You can practically count the "profits" already!