Secrets of the Fed's $7.8 TRILLION Bank Bailout Revealed
It's been three years since the the cataclysmic financial crisis that nearly destroyed the global economy, and three years since the government offered up $700 billion in public money to prop up the banks that caused the crisis in the first place.
Those loans, offered up through the Treasury's TARP program, have now all been paid back with interest, and as far as the banks are concerned, everything's back to normal. It wasn't such a big deal anyway! They didn't even want to take that money! And they sure as hell don't think any further government regulation is necessary.
Those efforts to obscure just how desperately fucked the financial industry was in 2008 were set back a bit yesterday by a barn-burner of a story by Bloomberg News' Bob Ivry, Bradley Keoun and Phil Kuntz.
As the story makes clear, the TARP bailout, which provoked the ire of lefties and nascent Tea-Partiers alike, was just the tip of the iceberg. Less well understood was the role of the Federal Reserve in propping up crippled banks. That's because even though the Fed's board is appointed by the government and the banks were receiving a staggeringly large subsidy through the Fed's below-market-rate loans, the details of this other massive bailout were kept completely secret -- not just from the public, but from elected representatives charged with oversight of the financial industry.
It took more than two years, Freedom of Information Act requests, and a lawsuit, but the Bloomberg team finally managed to reconstruct just how much banks relied on the Fed's support, and the answer is: a lot. Specifically, "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."
The Bloomberg report notes that while almost all of the loans have been repaid, banks actually made $13 billion off the Fed loans. More importantly, according to the article, "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."
It's definitely worth reading the whole story.
Go to Runnin' Scared for all our latest news coverage.
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