Bloomberg broke the biggest story of the year this past week by revealing that the Federal Reserve secretly committed 7.77 trillion dollars to bailing out banks.
7.77 trillion is more than 11 times the cost of the TARP program. Yeah, this is big. And this number was only through March 2009.
So I think it's worth taking a few minutes to break down the importance of this story and what it means.
What does the $7.77 trillion secret program mean?
1. Any talk about being broke is bullshit.
I'm just not sold on this payroll tax extension, this unemployment extension. Because we're broke.Bullshit.
So what are your ideas, Candidate A? Which agencies are you gonna just wipe out? We can't go on as we are; we don't have the money.Bullshit.
The fact of the matter is we're broke as a country, and we're going to have to look very, very carefully at foreign aid.Bullshit.
We're broke. And the American people know we're broke.Bullshit, bullshit, bullshit, bullshit.
We have plenty of money when it comes to bailing out banks. Anyone saying we're broke is saying this to try to justify their own agenda.
2. We have the resources.
- Fund job creation programs
- Rebuild our infrastructure
- Put money into education
- Continue social safety net programs (as is)
- Invest in energy independence
All we need is the political will. Anyone who says we can't do these things means they don't want to do these things.
If the government can come up with a $7.77 trillion secret program for banks, quit telling me we can't help out actual people.
3. You are being asked to shoulder the cost.
That's right. Why the call to pull money from Medicare, defense, Social Security, education, pensions, pay, etc?
You didn't think the banks should have to pay for their failures, did you?
This is the strategy known as privatize the profits, socialize the risks. It is the strategy behind the "too big to fail" banks.
In a nutshell, the strategy goes like this: Banks make risky trades using your deposits and, if they fail, they know they will be covered by the government because these assets are insured by the FDIC (at least up to a certain point).
Covering bank bets costs lots of money. How do we cover these bets?
Guess what? You're going to have to make do with less.
4. Our government is willing to lie to us.
This story didn't just happen.
Bloomberg had to fight in court for 2 years to get the Federal Reserve to release these details.
Why wouldn't they release the details?
Could it be because they knew no one would have gone along with this if it had been known?
The other shock is the magnitude of the lie. This is a $7.7 trillion lie.
5. The mainstream media does little to expose these lies
Much of the media continues to "back page" this story.
Ask yourself, with the exception of Bloomberg, if you've seen this story on any front pages. I haven't.
Doesn't this sound like a front page story? Federal Reserve spent $7.7 trillion to bailout banks? Without telling anyone?
Sure sounds like front-page news to me. Yet it's vastly under reported in the media.
Would anyone in America go along with this continuous bailout if they knew about it?
6. Occupy Wall Street is right.
Say what you want about Occupy Wall Street, but this doesn't change the fact that the biggest challenge still facing our nation is our broken financial system and our government which is in bed with this system.
It's clear that very little has changed since the financial crisis. Very few new rules have been put in place.
Opponents of the Dodd-Frank reforms are trying to "block appointments of new leadership to key oversight positions, cut funding, alter policies, use cost- benefit analysis as a roadblock to reform, and make other efforts to slow the pace or water down regulations."
7. You can't get a loan at 0.01% interest
Yes, that was the rate at which we lent money to some of these banks.
In other words, free.
Of course, at the same time, we had politicians screaming that we couldn't help out people who were foreclosed upon.
If you're a person, it's your "responsibility," if you're a bank, then you're "too big to fail".
Only banks could get loans at 0.01%.
We have a double standard in our country. One set of rules for average people, another set for those with the right lobbyists.
8. The problem is not fixed. It will happen again.
The banks are still engaging in risky derivatives trading. And they're even bigger than before when they were "too big to fail".
Almost nothing has been done in the way of regulation and lobbyists are already fighting the little that has been done.
There is no incentive for banks to do anything differently and, with the government backing their bets, no risk to them.
Under these conditions, it is only inevitable that this will happen again.
9. Why is this the biggest story of the year?
It exposes everything that is wrong with our current system:
- Secret government programs for banks.
- The "we're broke" lie - anyone who says "we're broke" is saying it to justify some other goal.
- One set of standards for banks, an entire different set for the rest of us.
- The failure of the media to "front page" these issues. I bet you know what's happening with the Kardashians though.
Most importantly, we have the resources to do what's right for our country.
We just need those in office to work for our country instead of for the largest corporate donors and lobbyists.
So what can you do?
- Tell anyone who will listen. It doesn't matter what political affiliation you are, this should make you angry.
- Write, call, or e-mail your Congressman and ask him or her what they are doing to investigate. They should be angry too.
- Write your local paper or TV news affiliate and ask them how they're covering the story. Why isn't this news?
- Support groups who are bringing these types of stories to light. Bloomberg deserves a huge amount of credit for pressing the government to release these documents.
- Move your money. Banks have shown they are poor gamblers. Take away the deposits they're using to gamble.
- Do whatever you can. Convince your friends. Support limiting corporate influence on Washington. Join those protesting in the streets if you can.
If this sounds like the beating of a drum you've already heard, apologies. But it's a drum that badly needs beating or nothing is ever going to change.
4:11 PM PT: Post mortem: I'd like to call out a few comments Kossacks have posted as excellent in trying to understand this complex subject.
VClib points out that loans to banks and infrastructure funding is an apples to oranges comparison. Military funding would have been a better proof point. Is it still bullshit to say "we're broke"? Yes. Look at our military budget which is greater than the next 20 countries combined. Where we have the political will, we have plenty of money.
HamdenRice points out that a huge chunk of the Fed money was in the form of overnight loans and this is likely why the Bloomberg number is so large. Money is borrowed and quickly paid back. I suspect this is true, but it would be nice to have this verified from the info Bloomberg obtained. Secrecy leads to questions. And there are still plenty of questions and, little has changed between how banks operated before and how they operate now. They're still too big to fail. Also, it's easy to pay loans back if the Federal Government has been buying them back at +1% as suggested by some. Would be nice to see these details as well.
HamdenRice points out that the interest rate of .01% is questionable. The current short-term funding rate is closer to 1%. Not .01%.
Funkygal points out that I should have mentioned Obama for stating that "government should have to tighten its belt as well." Excellent point. Bullshit, Obama.
None of this changes the premise that if we have the political will, we're not "broke". Or that the banks are still too big to fail. Or that we need better and more reporting by our media on Wall Street and their relationship with our government. Or that you are being asked to tighten your belts when the 1% aren't.
Thank you again for the comments which I encourage everyone to read!
As katiec noted, this is an incredibly complex subject so they are incredibly helpful in broadening everyone's knowledge.
4:15 PM PT: It's also been an incredibly long day and the "update diary" window is incredibly small making proof reading incredibly difficult so please forgive the overuse of some words.