Bail-out Bombshell: Fed "Emergency" Bank Rescue Totaled $29 Trillion Over Three Years

I reprinted the beginning of this article by J. Andrew Felkerson from Alternet.org as it sheds more light on the complete failure of the current financial system.  Not that we didn't already know it is a failed system, but Felkerson's research may reveal a magnitude of collapse that may make even those politicians, in the pocket of the Fed, gasp. 

The Fed attempted to refute reports of $7+ Trillion as spurious while asserting they never lent more than $1.5 Trillion. I was astounded at the 1 1/2 figure to begin with.  $29 Trillion is in a different galaxy altogether!  If we are not rocked off our seat by this latest figure, it shows the degree to which we have become inured to the shocking behavior and impact of the fraction of 1% that actually scripted this financial debacle. 

We have moved from a house of cards into a skyscraper of cards.  Maybe this is the best news yet.  Ben left a comment that our financial system is on life support.  I would suggest it's more like a zombie.  Perhaps that's the reason for the term voodoo economics.  The system is already dead with just the appearance of being alive.

Bail-out Bombshell: Fed "Emergency" Bank Rescue Totaled $29 Trillion Over Three Years

While the 99% suffered hardship, a new study shows that the Fed propped up buddies in the banking industry and a vast shadow banking system far beyond what anyone has guessed.

Speculation about the the Fed’s actions during the financial crisis has made headlines on and off again over the last several years.  The latest drama occurred on November 27 when Bloomberg published an article, “Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress," which gives an account of the news agency’s struggle to bring to light the details of the Fed’s emergency programs. Bloomberg throws out some very large numbers, revealing that as of March 2009, the Fed lent, spent, or committed $7.77 trillion worth of aid to the financial system and that banks used the low interest rates charged on these loans to make an estimated $13 billion in income. 

On December 6, the Fed struck back, issuing a four page unsigned memo intended to correct recent “egregious errors and mistakes” found in various reports of its emergency lending facilities.  The Fed argues that the “total credit outstanding under liquidity programs was never more than about $1.5 trillion.”  While Bloomberg wasn’t mentioned explicitly in the Fed memo, it was fairly clear to whom the response was directed.  The following day Bloomberg defended its reporting, and the Wall Street Journal’s David Wessel came to the Fed’s defense, characterizing Bloomberg’s methodology as a “great story,” but ultimately not “true.”

All this may sound like controversy, but it’s little more than a tempest in a teacup.

Here’s the hurricane: In reality, no less than $29.616 trillion is the total emergency assistance provided by the Fed to foreign and domestic entities during the Global Financial Crisis. Let’s repeat that: $29 trillion. This astounding number is over twice U.S. gross domestic product, the nominal value of all goods and services produced for the year 2010.  This is the total of the bailout as calculated by Nicola Matthews and myself as part of the Ford Foundation project, A Research And Policy Dialogue Project On Improving Governance Of The Government Safety Net In Financial Crisis.  We will be presenting the results of our analysis in a series of papers published by the Levy Economics Institute, the first of which, “29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient,” is already available here.

The results we have calculated are presented below, and it is important to note that the totals are cumulative and in billions of U.S. dollars. (The numbers in parentheses indicate amounts still outstanding as of November 10, 2011).

Facility Total Percent of Total
Term Auction Facility $3,818.41 12.89%
Central Bank Liquidity Swaps 10,057.4 (1.96) 33.96
Single Tranche Open Market Operations 855 2.89
Term Securities Lending Facility and Term Options Program 2,005.7 6.77
Bear Stearns Bridge Loan 12.9 0.04
Maiden Lane I 28.82 (12.98) 0.10
Primary Dealer Credit Facility 8,950.99 30.22
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility 217.45 0.73
Commercial Paper Funding Facility 737.07 2.49
Term Asset-Backed Securities Loan Facility 71.09 (10.57) 0.24
Agency Mortgage-Backed Security Purchase Program 1,850.14 (849.26) 6.25
AIG Revolving Credit Facility 140.316 0.47
AIG Securities Borrowing Facility 802.316 2.71
Maiden Lane II 19.5 (9.33) 0.07
Maiden Lane III 24.3 (18.15) 0.08
AIA/ ALICO (AIG) 25 0.08
Totals $29,616.4 100.0%

 

I want to be clear. These are the totals of Fed lending and asset purchases actually undertaken since the bail-out began. There is no double-counting. And we do not include any credit facilities created by the Fed unless they were actually used. These figures accurately reflect the cumulative totals over the approximately three years actually used by the Fed to prop-up domestic and international banks, shadow banks, central banks, and even some non-financial institutions. Read the rest...

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Comment by Lindsay Newland Bowker on December 17, 2011 at 4:41pm

Jitendra,

 

Thnaks for posting.  It is important that Occupy pointto the Fed and the need for radical reform of the central banking system which is the Federal Reserve Bank.

 

The Fed is the blackhole of democracy.

Thnak goodness Congress gave us the GAO audit of the FED from which this dat ais now emerging.

 

We cannot survive a sytem of endless growth ( Dacid Eggleton had posted a wonderful link called "Crash Course" that explains the inevitable collapse of endless growth in simple economic terms..we cannot have  a system where a largely slef reguated ed can maufcature money as it sees fit..loan that money in whatever ways it wishes, incurring U.S. debt with every expansion of the "money supply".

I don't have too many ideas about central bak reform but it is urgent and central to all the calamities which have befallen us and will fall on us soon when the commodiies bubble bursts.

David's excellent film is not on the Fed..it is on the inevitable faiure of system based on growth ( rather than balance) and does hve a fanatstically simple and clear explanation of "fiat money"..our ystem and how " fractional resereve banking" sets us up for catastrophe.  I believe it was called "Crash Course"  .

Central Bank reform is very estoeric..way beyond me, but there are experts, UI belee to whom we could look for guidance.

Thanks again Jitendra for calling attention to how the FED is damaging us now and casting a dark cloud on our future.

 

Comment by Jitendra Darling on December 19, 2011 at 8:38pm

Surprised not many people are interested in this accounting.  It feels to me that the exposure of this particular information that the Fed was hoping to keep under wraps, may prove to be a somewhat significant chink in some hefty armor.   It gives the few remaining Congresspeople of integrity a little leverage, though for what exactly, I'm not certain.

Comment by Lindsay Newland Bowker on December 19, 2011 at 9:01pm

Jitendra,

 

All of it makes most people's eyes glaze over.  Most of us aren't even sure how many zeros there are in a trillion.  So thi sis toughone and the problem is it's not like the Fed did anything it hasn;t always done with no scrutiny..the problem is whtathe FED is and that there is no scrutiny.

Revamping our entire central banking system is key and our good freind and wise man David Eggleton gave us a very accessible explanation of what's wrong wiht the existing system in the Crash Course link he provided.  So it can be easily understood by anyone if we make it a point.

 

I am so grateful that the GAO audit mandate was apssed and that a preliminary audit is bringing us thi s information.that perhaps will awaken people and commit their energies and prupose into a complete verhaul f our central bank sysem and the premises it operates on.. fiat, fractional reserve, endless growth, endless debt.

 

We should get Ben here /his main gig is investment counseling ( socially responsble), an MBa and I am sure someone who understands derivatives inside out as I now do ( like into the yes of the devil himself to look at what derivates have wrought in our market and how hard it is to extricate ourselves from them)

A divestment campaign might be effective and relevant.  It helped put the squeeze on Apartheid in south africa ( The Sullivan Principles) getting all pensions, large instiutional investors ( churches etc.) and especially ( Ben's work) all individuals out of derivatives. People contacted me at home via  my TED Converation on the role of derivatives in the 2008 global food crisis who are doing significant divestment campaigns

 

And yes, more outing. 

Out Jaimie Dimaon ( arrest Jaimie Dimon). Occupy his lawn

Out Ben Bernanke

 

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