Secret records of US bank bailout released, over howls of protest

Bloomberg has won a lengthy Freedom of Inforn battle to get the details of a secretive, no-strings-attached multi-trillion-dollar payout from the Bush administration (continued by the Obama administration) to banks, the details of which were not available to Congress. The documents make it clear that the banks' posture that they were only borrowing the money to help the government (JP Morgan said it borrowed "at the request of the Federal Reserve to help motivate others to use the system") were purest refined BS. Morgan for example, had borrowed twice its cash holdings.

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.

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...”

Lawmakers knew none of this.

They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.

Secret Fed Loans Gave Banks Undisclosed $13B (via The Awl)


  1. Seven trillion? Oh babycakes, that’s small potatoes. It’s not even 14 figures:

    July 21, 2011 – 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.”

  2. 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.

    That’s not a bug, it’s a feature.

  3. I have never, ever wanted to hurt people so bad. Everything they’ve done to this planet, everything that these executives and their psychotic henchmen have incurred upon us and our foreseeable future while simultaneously scolding us for our wicked, wicked ways. The stark social maliciousness oozing from their every action, unmatched by the likes of fictional evil archetypes. It borders on incomprehensibility.  

    I do apologize if I am incoherent, I am angry and I am damned tired of this system, but have to face a whole life time of this, or worse.

  4. Problem is … the media and most citizens still treat these people like they know what is best for the world’s economy.   The leaders of the banks, the Fed, the lobbyists, and the government leaders elected and non-elected have shown that they don’t have a clue about running a stable economic system yet they are still treated as legitimate.  They are incompetent and should be run out of town.

    1. Then who do you propose we appoint to run such institutions, more bank leaders, the Fed, lobbyists and elected officials? Epic economic catch-22 is epic.

      1. Not sure but  lets have a real dialogue in the media and government about how the system is really working and what options are available…Lets shine the light on the rats and see what they have been tucking away.

        Get rid of the larger than life banks…break them up.  Get rid of all of the phony investments like derivatives etc….Tax the crap out of the stock and bond markets….put a surcharge on trades to go into a fund for future bail-outs.  Lets find out who exactly we owe all this money too….

        Public loans to companies should mean that  their books are open in their entirety to the public….no hiding the disasters until it is too late.   Make the company directors and executives personally liable for corporate failings….maybe they will exercise corporate oversite like they are supposed to.


      2. Who do I propose we appoint?  How about the economists who warned that this trouble was a-coming, a decade or so ago?  After all, they couldn’t do worse than the current lot, and at least they can point to their arguments as evidence that they know something about what’s going on…And a few of them also seem to be a lot happier with the idea of full transparency too, which is the other key problem here.   The red herring of “commercial confidentiality” is being wheeled out again as though actually revealing what you do would instantly lead to failure.  This would doubtless be true if you were engaged in less-than-legal transactions, but I’m sure none of these institutions have ever done anything like that.

        1. Sounds decent…just have to make sure that most of the input comes from people who do not have a vested interest in the banks or existing system….they have shown were they put their allegiance and it is not the public good.  This includes any politician that takes donations from the banking industry.  Shake up the system…..scrub out the government financial and banking committees, kick out the old guard that are beholding to the banks and put in all new congressmen and senators, get mean, no seniority, no tenure.

      3. Trying to run an economy is like trying to run a forest. It’s an ecosystem, not a machine. Thinking we can pull levers attached to interest rates and the money supply are a lot of what got us into this mess.

      4. The institutions themselves are the problem and they need to be eliminated.

        The only true just solution that has ever worked was Abraham Lincoln’s Greenback system. He saved the nation, everyone prospered and they hated him for it. 

        As soon as they got rid of him they instituted national banks again and put us into debt.

    2. The leaders of the banks, the Fed, the lobbyists, and the government leaders elected and non-elected have shown that they don’t have a clue about running a stable economic system yet they are still treated as legitimate.

      Yeah! They’re totally legitimized by the public! Someone ought to occupy Wall Str… oh wait…

  5. Time to burn all the money and dance around the fire.
    When the fire starts to wane
    we’ll stack the bankers end-to-end
    and start the dance all over again

  6. Banks, Wall Street, and the Federal Reserve destroy the Economy. In return for that, the Corporatocracy US Government gives them trillions of dollars.

    What the hell has happened? Democracy is dead. NWO arrived while everyone was watching TV. Wake up America, time to take back your country from the Corporations. It’s time for a revolution and take back Democracy.

    1. We hope.

      If it intensifies next year, then something significant will happen.

      I am concerned that it will fizzle out. I hope it doesn’t.

  7. Perhaps someone more knowledgeable than I am about such matters can explain how the Fed giving out $16 trillion dollars is not extremely disruptive to the economy.  Is it not that much in terms of the Federal Reserve’s usual dealings?  I would also think that the world markets would be kind of upset that the Fed is giving out $16 trillion dollars in secret loans.  Don’t these sort of machinations make it difficult to assess the health of the dollar?

        1. Tell that to the 16 million currently homeless children we have in our nation.

          And that is just the kids. That doesn’t count their families or the many other adults that are homeless and don’t have families.

    1. After reading this article, the $16 trillion number is very misleading.  These were very short-term, “revolver” type loans, and were a substitute for a normal end-of-day interbank loans.  Banks are required to have a certain level of assets, and if at the end of the day they are below what is required they will borrow from banks that have more than is required.  During the crisis, banks were afraid to lend to each other, which is why the Fed stepped in.

      Because these loans would be paid back the next day, or a couple days later, it’s a bit disingenuous to use a cumulative total.  It’s not like the banks were $16 trillion in the hole and the Fed pulled them out.

      That said, if true, I would say it’s a big deal that lawmakers weren’t aware of this when trying to pass reform legislation.  It’s certainly pertinent to the discussion of why this sort of crisis needs to be prevented.  Information on specific banks’ borrowings would have a big impact on their stock prices though, especially with the other articles coming out regarding insider trading by congressmen.  

      That’s my take.  May also be an issue that Jamie Dimon over at JPMorgan wrote to investors that they only took this money at the behest of the Fed to encourage others not to be afraid to use the facility.  That was a real issue, but I don’t think you can be inaccurate to stockholders like that.

      Disclosure: I work for an investment bank so take with as much salt as you wish.

      1. And if the banks can’t pay back the money the next day or two….because they took a big gamble and lost…..who holds the bag then?   

  8. Corporate Welfare!  The best kind of “Invisible Hand” is the giant plutocratic hand that picks your pocket.  Reverse Robin Hood, all day, every day. 

  9. When tens of trillions of dollars revolve around “confidence”, “stigma”, and “sentiment”, something somewhere has to be fundamentally broken.

  10. By the way if you think that $8 or even $16 trillion dollars is a large amount of money think again. The bank of international settlements in Basel just released the numbers for over-the-counter (unregulated) financial derivatives and we’ve just had an all time high of more than $700 trillion worth of that stuff in 2011. In comparison the whole world’s GDP is around $60 trillion. –

    Somehow the banksters managed to amass bets worth 11 years of the world’s productive effort. Please, please, please get the gallows sooner rather than later…

    1. Wasn’t that $700 trillion just for the first half of 2011? Which would make the bet closer to 20x the world’s productive effort…

      I just got very, very cold…

      1. “Wasn’t that $700 trillion just for the first half of 2011? Which would make the bet closer to 20x the world’s productive effort…”

        Nope. It’s ‘notional amount outstanding’ – the notional amount of all OTC trades currently running, not new trades. Notional value is not very helpful anyway, as derivatives usually cost/pay out a small fraction of their notional. More useful is the ‘gross market value’, which is the cost of replacing all the existing trades. That’s around 20 trillion USD. (Also, it doesn’t take account of netting, but I’m not sure what the effect of that is in the OTC market).

        They’re huge numbers, and it’s still scary, but it really doesn’t help if they’re misinterpreted and thus stripped of real meaning.

        It’s like heythere’s point that the 7.7 trillion, as the sum of shorter loans is misleading. I don’t claim the bank has lent me millions, just because I’ve got a mortgage with them, and every day so far they haven’t demanded I repay.

        The article says that on the worst day there were 1.2 trillion of loans outstanding, and the banks have made 13 billion from cheap loans. If you have an idea of the interest rate cut they got, and the length of the loans, you can do a back-of-the-envelope calculation as to the size of the loans on days other than the very worst. Looks like the upper end of the hundreds of billions range to me.

        Still scary numbers, but now they’re actually meaningful, rather than oh-noes-pick-the-largest-number-from-the-document. Getting angry is fine, just make sure you understand what you’re getting angry about. Otherwise you’re just a left-wing Tea Party.

  11. Maybe it’s not weird, but only seems so to unsophisticated me.  But anyway, is it weird that Bloomberg is reporting this?

    Didn’t we use to have Rolling Stone or The Village Voice or Mother Jones for this kind of reporting?  Hell, isn’t 30% of Bloomberg owned by Merrill Lynch?

    EDIT: Guess not, though they had a 30% ownership investment at the founding of Bloomberg L.P. thirty years ago. Still. Weird.

    1. “…is it weird that Bloomberg is reporting this?”

      Not if Michael Bloomberg is planning on running this election.  :)

  12. The real tragedy is that the honest and trusting are condemned to be ruled by the immoral and unscrupulous. In history this always ends bad and I don’t see how this time is any different.

  13. “Ben S. Bernanke argued that revealing borrower details would create a stigma”.

    Is this anything like my “very public” credit rating?

  14. Really? We’re shocked by this are we? The Fed responded to a short-term liquidity crisis that threatened the stability of the industrialized world with short-term loans. It kept the names of the banks who needed them a secret to prevent a run on them which would have taken the economy with it. Through its actions and TARP, we basically prevented a Great Depression.

    I’m angry that the banks weren’t broken up once they had been stabilized or had their collateral requirements increased significantly. I am not angry by the response of the Fed.

    1. Although the biggest banks on that list are ours (as much as an internationally operating bank can be “ours”), international banks account for nearly half the entities in the chart.

      I’d say the whole world is up against it.

      1. “””Although the biggest banks on that list are ours”””

        I challenge your definition of the word “ours”, because I don’t really them ours (as in the property of the American people).

  15. Please remember, the Tea Party began with a whiny diatribe by a CNBC reporter (on a trading floor) over a $75 billion program designed to keep 9 million Americans in their homes. Meanwhile, his bankster buddies were carting of more than 100 times that amount.

  16. Your hatred of the president is showing! This bailout had nothing to do with the Obama administration or, for that matter, the Bush administration.  The article went so far to explicitly state that Bush officials were kept in the dark.

    This bailout program was engineered by the Fed, and the Fed only.

    Read the freakin’ article and get your facts straight before you mistakenly go blasting President Obama or Bush.

    1. Not an Obama hater here, but I couldn’t help but notice that all the Bush’s economic “advisers” who were all ex-goldman sachs, were re-hired by Obama… That was my first indication that some is terribly not right…

  17. Really? That’s it. I quit. I’m tearing up my voter registration card and throwing it away, or maybe not as I’m running low on toilet paper. Either way, I’m going to open a bottle of Shiner, kick back and enjoy watching as the train wreck of Western Civilization crashes. When this slow motion disaster gets to the railcar I’m sitting it, I’ll utilize my 9mm opt-out and see what’s on the next plane of existence.

    Buh-bye suckers!

  18. how do you spell SCAM?
    Predicting the Future: base on the fact that the banks got away with this massive robbery, they are going to do it again, just a little bit bigger than the previous one, and if the American people don’t complain, again, they will do it over and over…. and then we will have an arm revolution in the US Libyan/Tunisia/Egypt/ style…

  19. needy institutions would be reluctant to borrow in the next crisis.

    Yeah, and monkeys might fly out of my butt.

    1. I am guessing that too many liberals are still hoping that Obama will change and become a man for the people. 

      And no matter what our economy is doing and how bad our national finances are, we have a horrifying past in our nation in regards to African American civil rights and slavery before that. So many liberals are hesitant and will not openly or harshly criticize Obama. The election of our first African American President was a historic moment that means a lot to most African Americans.

      If you listen to African Americans as a bystander while they hear criticisms of Obama from the left, many get very upset. And the reality is that much of the Tea Party type attacks are based on race. There is no doubt many racists amongst the Tea Partiers.

      African Americans have been very reliably Democratic/liberal for as long as they have been able to vote. I am not for the Democratic party, but we have to be careful about sullying the name of “Progressives” amongst African Americans. This would cause permanent damage to our political future.

      That is why you don’t hear Bernie Sanders trashing Obama. He isn’t even a Democrat. He doesn’t care about the Democratic party. But he refrains for openly attacking Obama. He is conscious of our nations history.

      When 2012 is done and if Obama is still the Prez, he better move way left. I don’t think he will, but that will be his last chance to save the nation.

      If he doesn’t magically transform, then we are going to see nation explode into open revolt. Because by 2013, if nothing has been accomplished politically (and it won’t) our nation will be so bad off, that we are going to be on the brink of total collapse.

      So, unfortunately, I think the entire 2012 year will be spent as slow build up phase. The economy and all our welfare will continue to get worse. 

      There is nothing that will get better in 2012. And it will look like we don’t have much support for rebellion, because a mass number of liberals will be waiting for Obama to get re-elected.

  20. There’s the part of capitalism (and gambling) where you are visionary, promise, risk… and win. Or alternatively, you are responsible and cautious… and win. That’s lost.

    There’s the part of capitalism (and gambling) where you are reckless, dishonest, a greedy and irresponsible swine… And creditors, shareholders, savers and the Devil come get you at the end demanding what is due theirs. That’s lost too.

    In fact, a stigma, disgrace, financial ruin and even suicide are SALUTARY, and even UNDERSTATED consequences of messing up at this scale. The actions of the government only reveal that it acted in this way to save these F***KS asses personally.

    Next time, it will be worse because the most important principle of free markets has been voided. No system can survive that. I am all for the free markets, with FREE in capital letters. That includes RESPONSIBILITY AND ACCOUNTABILITY. I am afraid that capitalism in the U.S. is dead.

  21. Revolution sounds fun, but displacing a ruling elite isn’t easy – they hide, morph, come back etc – after all, their wealth is highly mobile, and wealth is the pillar of their power.

    Better to support as many of the disrupting technologies that are coming out, and avoid feeding the beast that supports the 1%.  3D printing, new cash payment methods, don’t shop at Walmart, don’t watch junk movies at the theatre, don’t buy McDonald’s – etc, etc.

    If we all behave a more like ‘progressive Amish’, the 1% will start running out of air.  And every little bit helps!!

    1. The oligarchy must be forceably removed.
      They won’t go down easy.
      They will fight back, and they fight dirty.
      They have no humanity.
      But the only way to move forward is to remove the oligarchy.

      We see different statistics in different places, but basically, the top 0.1% have something along the lines of half of our total current “income” and they currently own something like 20% of our total real wealth.

      There is no way to reform that. It must be removed and redistributed.

      The French had a solution that worked out mostly OK. The Russians another. I’m sure we could come up with our own that works better than both of those.

  22. Given the contents of the Bloomberg article, is there a single, solitary reason Obama shouldn’t fire Geithner retroactively? In the immortal words of Kevin Kline in A Fish Called Wanda, “Ass-HOOOOOOOOOOOOLES!”

  23. The Federal Reserve extending these massive short term loans to preserve stability in the banking system during an extraordinary time was not just necessary and reasonable but the entire purpose of a central bank. Their success in preventing catastrophic collapse is likely deserving of praise. The part where they tried to do it without any public accountability in order to preserve the reputations of a pack of public coffer raiding dirtbags is wholly reprehensible.

    I also think the congressional representatives who say “If only we had known!” are a bunch of weasels. Listen, I have the most laymen’s understanding of what happened in our financial system, but even I realized that the only thing the Fed could possibly be doing during the crisis was EXTENDING TRULY MASSIVE SHORT TERM LOANS. You fucked up congress. You failed to come through with the needed regulatory changes to protect the interests of your constituency from what Teddy Roosevelt aptly called “malefactors of great wealth.”

  24. For any who believe the financial collapse was unpredictable, I highly recommend this clear, detailed explanation of the crisis, from credit default swaps, to bond-rating frauds of securitized collateral debt obligations.

    It’s Paul Krugman’s “Authors at Google” talk…From December 14th, 2007.

  25. It is only a matter of time before the 99% take up arms and start brutalizing bankers. 
    It’s happened before in the US, and countless times in Europe previous – it will happen again.

  26. I almost wanted to gloat that it was Repubs that have accomplished the ultimate sin of sins here, and not Dems as most people would expect, but then I realize. HOLY COW, our world is messed up. Let’s get rid of them all, I say! I’ve got a garden in the back yard, and a wood fireplace, anyone wanna join me? *sigh* But then can any of us really say that we didn’t see this coming?

  27. I printed a article posted July 21st, 2011 off the computer entitled: “Audit of the Federal Reserve Reveals $ 16 Trillion in Secret Bailouts.” In the article it says Senator Bernie Sanders posted this information on his web site showing exactly who received the money. The money went out between Dec. 2007 to Jan. 2009. According to my calculations that was during the Bush Administration. Here’s the breakdown: Citigroup $2.5 Trillion, Morgan Stanley $2.04 Trillion, Merrill Lynch $ 1,949 Trillion, B of A $ 1.344 Trillion, Barclays PLC $(UK) $868 Billion, Bear Stearns $ 853 Billion, Goldman Sachs $ 814 Billion, Royal Bank of Scotland (UK)  $ 541 Billion, JP Morgan Chase $ 391 Billion, Deutsche Bank (Germany) $ 354 Billion, UBS ( Switzerland) $ 287 Billion, Credit Suisse (Switzerland) $262 Billion, Lehman Bros. $ 183 Billion, Bank of Scotland (UK) $ 181 Billion, BNP Paribas (France) $ 175 Billion  and many many more including Bank of Belgium. I showed this article to many people, no one could believe it, I still don’t know if it’s true. If it is, we’re in big big trouble.

  28. Its times like these when I actually start to believe Ron Paul when he says the federal reserve should be disbanded. Foxes guarding the henhouse.

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