The U.S. Federal Reserve has been too busy bailing out foreign banks and dictators to help Americans during the financial implosion and Great Recession. The Fed has become the "global lender of last resort" all backed by the U.S. taxpayers. Not only is the U.S. the world's policeman, but we're also the world's banker too.
Who were the lucky banks who stuck us with the bill? "In addition to some of the biggest Wall Street firms and hundreds of smaller U.S. banks, the Fed’s emergency lending supported the U.S. branches of foreign banks, including one partly owned by the Libyan government."
Not only did Libya's Moammar Gaddafi's bank get bailed out, but also communist China was a big borrower and six European banks were among the top companies taking advantage of the backstop provided by the Fed and backed by U.S. taxpayers. In fact, foreign banks used the Fed's secret lifeline the most, Bloomberg reports.
The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record. The disclosures may stoke a reexamination of the risks posed to U.S. taxpayers by the central bank’s role in global financial markets.
"The release of more than 25,000 pages of documents also revealed that many US banks had borrowed surprisingly little from the discount window", writes The Telegraph.
"Foreign banks took advantage of Fed lending programs even as their host countries moved to prop them up or orchestrate takeovers." Sure, why not? The Americans are always glad to pick up the bill. Just put it on our tab, while our ruling class decides to cut our Social Security so the "sacrifice" can be "shared". After all, who will help wealthy Americans evade taxes if foreign banks fail?
Six European banks were among the top 11 companies that sold the most debt overall -- a combined $274.1 billion -- to the Commercial Paper Funding Facility…
Bank of Scotland Plc, which had $11 billion outstanding from the discount window on Oct. 29, 2008, was a unit of Edinburgh-based HBOS Plc, which announced its takeover by London-based Lloyds TSB Group Plc in September 2008.
The New York Times reports that "the biggest borrower from the Fed program was Dexia, a French-Belgian bank that frequently held more than $30 billion in outstanding loans from the program from late 2008 to early 2009". In fact, "Dexia was one of the most frequent and prolific borrowers".
Dexia borrowed at least $31.5 billion from the Fed, while combined the governments of France, Belgium, and Luxembourg only ponied up $9.2 billion to help bail out the company that "made the nearly fatal mistake of buying an American company that insured bonds — including subprime mortgage bonds". Such a mistake should have been fatal, but thanks to the Fed, the U.S. taxpayer covered Dexia's bet.
Other foreign discount-window borrowers on Oct. 29, 2008, included Societe Generale SA, France’s second-biggest bank; and Norinchukin Bank, which finances and provides services to Japanese agricultural, fishing and forestry cooperatives. Paris- based Societe Generale borrowed $5 billion that day, and Tokyo- based Norinchukin borrowed $6 billion.
And then there's China — the nation where most of America's manufacturing was shipped in exchange for higher corporate profits. Bloomberg reports:
Bank of China, the country’s oldest bank, was the second- largest borrower from the Fed’s discount window during a nine- day period in August 2007 as subprime-mortgage defaults first roiled broader markets. The Chinese bank’s New York branch borrowed $198 million on Aug. 17 of that month, while two Deutsche Bank AG divisions borrowed $1 billion each, according to a document released yesterday.
The New York Times writs "a billion Here, a thousand there" from the Feds "saved Wall Street in the fall of 2008". I'm just so glad we saved those Galtian giants, those masters of the universe from financial ruin. Look at all the good they've done for the U.S. since 2008. The foreclosure crisis averted and we're damn near full employment with the first increase in take-home pay in nearly 30 years! Amazing job Wall Street! Oh wait. While Wall Street compensation, bonuses, and CEO bonuses bounced back with "the biggest gain in at least three years", the other America is still stuck in the longest, deepest recession since the Great Depression. Out here, we're losing our homes and struggling to find work.
The Fed sends billions of dollars to foreign banks, while ignoring their mandate to help the nation secure "maximum employment" and "stable prices" like, for example, home prices. But, surely the American sacrifice has been worth it. Thanks to the Fed, we've saved the foreign banks and bailed out the Chinese and the Libyan dictator. We just need to think of it as the 21st century Marshall Plan for the global rich, communist 'capitalists', and dictators with oil. We'll eat cat food, they'll eat caviar.