Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.
By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.
Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.Don't forget about the foreign borrowers of course:
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.And of course those ultra low low rates that only the Bernank can supply!:
While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.Here is the real kicker:
The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.
The Fed’s liquidity lifelines may increase the chances that banks engage in excessive risk-taking with borrowed money, Rogoff said. Such a phenomenon, known as moral hazard, occurs if banks assume the Fed will be there when they need it, he said. The size of bank borrowings “certainly shows the Fed bailout was in many ways much larger than TARP,” Rogoff said.Awww, corporate welfare at its finest. I guess this is why Bernanke got Man of the Year from Time. Thankfully Bloomberg has put all the data together in a handy interactive graph for all of us, click to be linked:
So how did all this Fed stimulus help the well-connected banks? See Bank of America today:
Goldman Sachs Chief Executive Lloyd Blankfein has hired Reid Weingarten, a high-profile Washington defense attorney whose past clients include a former Enron accounting officer, according to a government source familiar with the matter.Hmm, looks like something big is coming Blankfein's way. Speaking of big, look at gold prices today:
Now that it looks like Libya may finally be in the rebels' hands, it looks like the internet's premier news site on everything American imperialism, the great Antiwar.com, is under investigation by the FBI. I am not making this up:
It was a beautiful Saturday afternoon and it was my day off. Sitting in my rather neglected garden, as the late afternoon light sparkled golden on the tops of the plum trees, I put down my book – the 1995 edition of The Year’s Best Science Fiction, edited by Gardner Dozois – with more than a little annoyance. I was smack dab in the middle of a short story, “Asylum,” by Katharine Kerr, a tale about a future military coup in the US, written from the point of view of a particularly earnest liberal with faintly radical leanings. The main character is a woman writer who is abroad when the generals take over, and is marked as an enemy of the state on account of her book, Christian Fascism: Its Roots and Rise. Her San Francisco office is raided and her files carted away. She gets a call from a friend before the coup plotters cut off all communications with the outside world: “It’s seven days in May – stay where you are!” She stays, but is tortured by the prospect of her daughter being in harm’s way: when communications with America are finally restored, she wrestles with the question of whether to pick up the phone and make a call that might endanger her daughter. After all, what if the Christian Fascists are listening?Now this isn't really surprising considering some of things that are written on Antiwar.com. The same goes for Lewrockwell.com. Still, it is quite disturbing to see a site that reports on news with plenty of opinion get this kind of scrutiny from the federal government. Just see this excerpt:
The phone kept ringing. I picked it up with annoyance: it was our webmaster, Eric Garris, telling me about this – FBI documents recovered through the Freedom of Information Act that detail surveillance of Antiwar.com, the staff, and specifically yours truly.
A word about the authenticity of the documents and their provenance: they were posted on a public website, Scribd.com: their form, including the extensive redactions, the acronymic bureaucratese, and the lunk-headed cluelessness which dominates the FBI’s corporate culture, so to speak, combine to verify their authenticity.
I saved the best for last: the “action” recommendations contained in the memo. While directing the Washington FBI’s Electronic Communication Analysis Unit (ECAU) to “further monitor the postings of website www.antiwar.com,” the San Francisco office – where both Eric and I lived at the time – is tasked with the following:Tomorrow I am off to a conference in Seattle, expect no posting. I will happily take bets on whether or not some news will leak that the U.S. financed and provided a lot more support to the rebels then originally let on. I will also take bets on what kind of government the rebels will implement; something tells me it will be worse than democracy, which is already pretty bad.
“It is recommended that a PI be opened to determine if [redacted] are engaging in, or have engaged in, activities which constitute a threat to National Security on behalf of a foreign power.”
Reading that, I could hardly believe my eyes. Yielding to a sudden need for fresh air, I went out into my garden and just sat there for a few moments, warming myself in the last rays of the setting sun. It all seemed so unreal. Was this really happening, or had I imagined the whole thing? I returned to my computer and read it again, just to be certain, and – sure enough – there it was, plain as the pixels on my screen: I was accused of being “a threat to National Security” and working “on behalf of a foreign power.”
What “foreign power” would that be – Libertopia? Galt’s Gulch?