Bloomberg news has served up another bombshell story on the Federal Reserve loans during the 2008-2010 bail outs. Banks made $13 billion off of secret and ultra-cheap loans from the Federal Reserve. Banks lost $21.6 billion during the same time. That's $13 billion of free money in essence.
Literally the Fed committed $$7.77 Trillion to bailing out these banks. This dwarfs the $700 billion TARP bail out. Bloomberg:
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
Citigroup was the highest beneficiary, making $1.8 billion in profits from Federal Reserve loans, yet lost -$29.3 billion. Bloomberg has made an interactive chart on each individual bank's profits from loans along with their losses, available here.
Literally the too big to fail banks got bigger from the bail outs.
Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.
The Bloomberg story went viral almost immediately. Below is a round up of what others are saying after reading the story.
Felix Simon graphed up just one example of Morgan Stanley's evaluation and loan amounts in a long article that adds to the Bloomberg piece.
Ladies and Gentlemen, this is what a lender of last resort looks like. What you’re looking at here are three lines. The black line is Morgan Stanley’s market capitalization, which tends to hover in the $40 billion range but which fell as low as $9.8 billion in November 2008. The orange line is the amount that Morgan Stanley owed to the Federal Reserve on any given day — an amount which peaked at $107 billion on September 29, 2008. And the red line is the ratio between the two: Morgan Stanley’s debt to the Federal Reserve, expressed as a percentage of its market value. That ratio, it turns out, peaked at some point in October, at somewhere north of 750%.
Naked Capitalism said:
The bottom line is everybody close to the process lied like crazy.
FireDog Lake also amplified the great lie and the use of TARP as a diversion:
The thrust of the story is that information about the massive size and scope of these efforts was deliberately concealed from Congress and the American people during a critical period.
ZeroHedge calls it:
The highest form of crony capitalism writ large and explained in its clearest and most egregious manner yet.
The Huffington Post didn't even comment. They just linked to Bloomberg under the title, The Secret Life of Banks, nuf said.
Hats off to Bob Ivry, Bradley Keoun and Phil Kuntz for digging through 29,000 pages of FOIA data they finally received.