Yesterday Bloomberg News released the report from its investigation into the loans the Fed gave to the banks between August 2007 and April 2010 as a consequence of the crash. The results are fairly astounding. It makes TARP look like a mere pond ripple. The loans came to a total of $1.2 trillion dollars with Morgan Stanley, Citigroup and Bank of America being the top recipients.
Here’s a link to the Bloomberg’s summary of the report. Wall Street Aristocracy Got $1.2 Trillion in Loans from Fed
More below.
Fed Chairman Ben Bernanke did not want to disclose this information stating he felt the data would lead to runs on the banks receiving the loans. Bloomberg went after the information via the Freedom of Information Act suing to force disclosure.
Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep at least some Fed borrowings secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.
Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.
This chart nicely summarizes the ransom, I mean, bailout funds, given.
The Fed’s Secret Liquidity Lifelines
As you can see, there were foreign banks among the top recipients.
Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.
The largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.
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 rest of the article goes into great detail about how the Fed distributed these funds, relaxing its standards on acceptable collateral from the banks, accepting junk bonds, for example. It also discusses the rolling nature of the crisis, how contagion spread from one financial institution to the next, and how the banks utilized subsidiaries to maximize their vascular sucking at the Federal jugular, vampire squid that they are (hat tip Taibbi).
Banks maximized their borrowings by using subsidiaries to tap Fed programs at the same time. In March 2009, Charlotte, North Carolina-based Bank of America drew $78 billion from one facility through two banking units and $11.8 billion more from two other programs through its broker-dealer, Bank of America Securities LLC.
Banks also shifted balances among Fed programs. Many preferred the TAF because it carried less of the stigma associated with the discount window, often seen as the last resort for lenders in distress, according to a January 2011 paper by researchers at the New York Fed.
And they wonder why there is no longer any trust on Main Street?
And you look at what is happening to all those banks in Europe today?
And you look at what is going down with Bank of America?
Yup...
UPDATE:
Here is a report from Senator Bernie Sanders The Fed Audit dated July 21, 2011 with discussion of the results of a probe that indicates a $16 trillion (that's $16,000,000,000,000) secret bailout.
The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. "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," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."
Also, here's a good article about the Bloomberg report from the San Fran Chronicle:
Fed's $1.2 Trillion Loan Lifelines Dwarfed TARP: Glossary