Submitted by Elaine Magliaro, Guest Blogger
Fed Lifts Veil of Secrecy (December 1, 2010)
“Almost two years ago I asked Chairman Bernanke to tell the American people which financial institutions and 
corporations received trillions of dollars as part of the Wall Street bailout. He refused. Today, as a result of an audit-the-Fed provision I put into the financial reform bill, we finally learn the truth – and it is astounding.”
— Sen. Bernie Sanders (I-Vt.), author of Fed disclosure provision
Lifting the Veil of Fed Secrecy
Who Got Secret Fed Bailouts?
The Big Winners
• Goldman Sachs received nearly $600 billion
• Morgan Stanley received nearly $2 trillion
• Citigroup received $1.8 trillion
• Bear Stearns received nearly $1 trillion
• Merrill Lynch received some $1.5 trillion
• Deutsche Bank, a German lender, sold the Fed more than $290 billion worth of mortgage securities
• Credit Suisse, a Swiss bank, sold the Fed more than $287 billion in mortgage bonds
Also receiving secret Fed bailouts
• General Electric
• McDonald’s
• Caterpillar
• Harley Davidson
• Toyota
• Verizon
Release: Sanders Statement on New Federal Reserve Lending Disclosures (March 31, 2011)
WASHINGTON, March 31 – Under court order, the Federal Reserve today identified more banks that took loans during the financial crisis using a once-secret system that Sen. Bernie Sanders (I-Vt.) called “welfare for the rich and powerful.”
A Sanders provision in the Wall Street reform law already had forced the Fed last Dec. 1 to name banks that took trillions of dollars in emergency loans during the crisis.
“The Federal Reserve bailout was welfare for the rich and powerful and you-are-on-your-own rugged individualism for everyone else,” Sanders said. “The information released by the Fed today should never have been kept secret. This money does not belong to the Federal Reserve; it belongs to the American people. I applaud Bloomberg News, Fox News and others for their success in lifting another veil of secrecy at the Fed.”
Sanders said the latest disclosure raises questions about conflicts of interest. While Jamie Dimon, the CEO of JPMorgan Chase, served on the board of directors of the New York Fed, in one month alone, April of 2008, JPMorgan Chase received a combined $313 billion in Fed loans directly benefitting JP Morgan Chase and other financial institutions.
“This is an obvious conflict of interest on its face that must be investigated as part of the independent audit that my amendment requires to be completed this summer. When JPMorgan Chase was telling the world about their great financial success, it seems like they were using the Fed’s discount window as a giant piggy bank.”
Sanders’ provision in the Wall Street reform bill required the central bank to disclose which financial institutions, corporations, and foreign central banks took more than $3 trillion in what were secret loans.
His amendment also directed the Government Accountability Office to conduct the first top-to-bottom audit of the Federal Reserve. The findings of that investigation by the non-partisan research arm of Congress are due to be made public this July.
Usage of Federal Reserve Credit and Liquidity Facilities
MSNBC w/ Cenk: Matt Taibbi – Magic Money Printing Machine at The Fed
Need I say more?????
I’ll just add this: Because April is National Poetry Month, I thought I’d write a song parody to go with this post. I dedicate it to Senator Bernie Sanders of Vermont.
Guess Where Our Money Goes?: A Song Parody by Elaine Magliaro
(To be sung to the tune of That’s Where My Money Goes…to Buy My Baby Clothes)
Guess where our money goes? Not where you might suppose!
It goes to millionaires with big yachts and grand chateaux.
They’re worth their weight in gold. The rest of us keep getting rolled.
Hey, hey! That’s where our money goes!
Bernanke is in the tank for Goldman Sachs and Citibank,
GE and Verizon, too. They got bailout funds—it’s true!
The Fed gave them lots of dough—tried to keep it a secret though.
Hey, hey! That’s where our money goes!
The rich keep getting more and more! It’s something that we should deplore.
Citizens should know about the money that Ben’s passing out.
Bernanke, it just ain’t fair. Main Street oughta get a share.
Hey, hey! That’s where our money goes!
SOURCES & FURTHER READING
Sanders Op-Ed: Sunshine Week
Source: The Caledonian-Record (March 16, 2011)
Articles & Blog Posts by Matt Taibbi
The Great American Bubble Machine
From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression — and they’re about to do it again
(This article appeared in the July 9, 2009 issue of Rolling Stone.)
Wall Street’s Big Win
Finance reform won’t stop the high-risk gambling that wrecked the economy — and Republicans aren’t the only ones to blame
(This article appeared in the August 19, 2010 issue of Rolling Stone.)
Why Isn’t Wall Street in Jail?
Financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them
(This article appeared in the March 3, 2011 issue of Rolling Stone.)
Looting Main Street
How the nation’s biggest banks are ripping off American cities with the same predatory deals that brought down Greece
(This article appeared in the April 15, 2010 issue of Rolling Stone.)
Jefferson County, Alabama: Screwed By Wall Street, Still Paying
(TAIBBLOG—April 7, 2011)
Why is the Fed Bailing Out Qaddafi?
(TAIBBLOG—April 1, 2011)
Edited to add:
The S.E.C.’s Revolving Door: From Wall Street Lawyers to Wall Street Watchdogs (TAIBBLOG—March 30, 2011)
Various matters: endless war, military detention, the Fed
By Glenn Greenwald
http://www.salon.com/2011/11/28/various_matters_endless_war_military_detention_the_fed/singleton/
Excerpt:
(3) A Bloomberg report today revealed that the Federal Reserve loaned $1.2 trillion of previously unknown funds to banks at below-market rates, enabling those banks to earn profits in excess of $10 billion (all of which dwarfed TARP). This was part of the impetus for the joint effort by Alan Grayson and Ron Paul in 2010 to compel an audit of the Fed. In particular, watch this 5-minute video of Alan Grayson from early 2009 grilling the Vice Chair of the Federal Reserve, Donald Kohn, as Grayson demanded to know how much the Fed loaned and to which institutions, while Kohn refused to provide that information (absurdly claiming that such transparency would prevent banks from wanting to borrow in the future: in light of the disclosures today, does anyone believe banks will no longer borrow from the Fed?).
*****
$1.2 Trillion Slush Fund: Congressman Alan Grayson Grills Fed Vice Chair Donald Kohn
Secret Fed Loans Helped Banks Net $13B
By Bob Ivry, Bradley Keoun and Phil Kuntz
November 27, 2011
http://mobile.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
Excerpt:
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
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.
‘Change Their Votes’
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”
The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.
The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
Wall Street Banks Earned Billions In Profits Off $7.7 Trillion In Secret Fed Loans Made During The Financial Crisis
By Travis Waldron on Nov 28, 2011
http://thinkprogress.org/economy/2011/11/28/376430/wall-street-banks-fed-loans-secret/
Excerpt:
In the lead-up to the financial crisis that crippled the American economy and plunged the country into a recession, the Federal Reserve made trillions in undisclosed loans to struggling banks and financial institutions, according to official documents obtained by Bloomberg News. Six of the country’s largest banks then turned those loans into more than $13 billion in previously undisclosed profits.
The total cost of the Fed loans amounted to $7.77 trillion, and unlike the funds made available by the Troubled Asset Relief Program (TARP), the loans came with virtually no strings attached for the banks:
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
In one month, Morgan Stanley — one of the most vulnerable financial companies at the time — took $107 billion in secret loans, enough to pay off a tenth of the nation’s delinquent mortgages. The loans, like those made to other institutions, were never reported to Morgan Stanley’s shareholders or the taxpayers who subsidized them.
Other banks drew similar loans without disclosing them. Bank of America, for instance, held $86 billion in public debt on the day then-CEO Ken Lewis declared his company “one of the strongest and most stable major banks in the world.” Bank of America’s Fed borrowing peaked at $91.4 billion in February 2009; at the same time, it benefited from $45 billion in TARP loans.
Financial System Riskier, Next Bailout Will Be Costlier, S&P Says
By Shahien Nasiripour
Huffington Post, 4/19/2011
http://www.huffingtonpost.com/2011/04/19/financial-system-riskier-_n_851122.html
Excerpt:
The financial system poses an even greater risk to taxpayers than before the crisis, according to analysts at Standard & Poor’s. The next rescue could be about a trillion dollars costlier, the credit rating agency warned.
S&P put policymakers on notice, saying there’s “at least a one-in-three” chance that the U.S. government may lose its coveted AAA credit rating. Various risks could lead the agency to downgrade the Treasury’s credit worthiness, including policymakers’ penchant for rescuing bankers and traders from their failures.
“The potential for further extraordinary official assistance to large players in the U.S. financial sector poses a negative risk to the government’s credit rating,” S&P said in its Monday report.
But, the agency’s analysts warned, “we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008.”
Because of the increased risk, S&P forecasts the potential initial cost to taxpayers of the next crisis cleanup to approach 34 percent of the nation’s annual economic output, or gross domestic product. In 2007, the agency’s analysts estimated it could cost 26 percent of GDP.
From Senator Carl Levin:
Senate Investigations Subcommittee Releases Levin-Coburn Report On the Financial Crisis
April 13, 2011
http://levin.senate.gov/newsroom/release.cfm?id=332491