Discount window bailout operations for banks are now officially worse in magnitude than in 2008, though not in scope

We don't have 500 bank failures.

What we do have is Dodd-Frank 2010 limits on deposit insurance not keeping up with 2023 realities.

Unless Congress steps in and helps high depositors, there will be an exodus of high depositor accounts all across the country to money center banks which have too big to fail status and an FDIC put as systemically important enough to backstop.

This would mean many local banks will come under stress and at minimum weaken local economies even if they don't fail.

We do not need the big banks to become any more powerful than they already are.

And we certainly must not weaken local economies.

The reasons in the plumbing don't matter at this point. It's too late for that.

The $250k limit has to change. The authorities at the Fed, Treasury, and FDIC are constrained by that in what it is permissible for them to do.

Call your Senator.

Call your Representative.

 

This is as good a day as any to remember that Ben Bernanke's Fed under Obama bailed out the banksters and hung 6.5 million homeowners out to dry

 Bloomberg, August 21, 2011, here:

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, 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. ...

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc. ...

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

 

David Stockman Hates Everything About America, Except Cash

Just like, you guessed it, The New York Times!

He hates:

Crony capitalism, Keynesianism, imperialism, stimulus, social insurance, incumbency, the constitution, free elections, lobbying, deficit spending, the Fed's discount window, the FDIC, the Gramm-Leach-Bliley Act, quantitative easing, interest rate repression, and currencies in a race to the bottom.

But honestly, all he really hates are the new stock market highs.

"When the latest bubble pops, there will be nothing to stop the collapse. If this sounds like advice to get out of the markets and hide out in cash, it is."

Wah. Wah. Wah.

Read it all here.

US Banks Stay In Business Because Of The Fed's Discount Window

So says Jeff Bailey, here:

Bankers will talk about being entrepreneurial and needing the freedom to compete. This is B.S. The only reason they're able to stay in business is FDIC deposit insurance and access to the Fed's discount window for emergency borrowing. They exist by virtue of extraordinary government assistance, and while their shareholders get to [the] upside of this deal, taxpayers are hugely exposed to the downside.

Very few people seem to understand this, or even care anymore. And it's the not-caring that really amazes. The lid was blown off this story by Bloomberg here on Sunday night, November 27, 2011, the end of the Thanksgiving weekend when absolutely nobody was paying attention in the public:

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.

The story became the rage for a time among bloggers who blogged about it at length and news organizations who dutifully reported the astounding figures, but the nation shrugged. Tens of millions of Americans lost their jobs, 5 million residences were forfeit by their owners, and the federal government basically did nothing about it, even protested there was not much it could do, but it made damn sure the bankers and corporations were made good at great expense and risk to the public. Meanwhile the big banks have grown bigger and more dangerous than ever, re-inflating asset prices in the process as they try to repair their off-balance-sheet balance sheets, along with their public ones, and rank and file Americans are basically set back decades because of their losses.

The poor you have always with you, the man from Galilee once told us. Customers of the banks, no doubt, every last mother's son of them.

Most American Banks Are Paying More at the Discount Window Than EU Banks For Swaps

Swap lines for EU banks are now discounted to 0.58 percent. The European Central Bank gives us euros as collateral, and we give them dollars at that rate.

Most American banks are paying much more for dollar loans, either 0.75 percent or 1.25 percent, at our own discount window. Seasonally adverse conditions allow some US banks to borrow at 0.25 percent. 

The reason the EU gets such a break? Maybe because the EU is in big, big trouble, Trouble with a capital "T".

See the discount window data, here.

h/t Mish

Net Return On Massive Secret Loans To Biggest Banks By Federal Reserve Was Barely 1 Percent During Subprime Meltdown Between 2007 and 2009

Bloomberg has the story here.

This while home buyers in the US in 2007 with excellent credit were paying 6 percent or more for 30 year fixed rate mortgages.

Here's the propaganda line from the article:

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.

But the depression wasn't averted, no matter how much lipstick Bloomberg tries to put on this pig:

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Instead of "banks and the economy remain stressed," how about, "it was a depression nevertheless"? We now know thanks to revised GDP numbers released by the government in its annual revision in July that GDP went slightly negative for the first time in 2008, followed by a substantial negative GDP report for 2009. Two back to back years of negative GDP are a depression, just as surely as two back to back quarters of negative GDP are a recession. Clearly not the Great Depression, but a depression nonetheless.

Yet we still can't bring ourselves to say it.

As usual, the banks are ground zero for depression, whether it's under the Federal Reserve Act of 1913 which was meant to prevent booms and busts, or not:

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Why do you think there's been such a flight to cash ever since, first by the banks, then by the corporations, and now by the citizenry, always the last to know?

Nothing has changed, and nothing has been fixed. 

Debt that can be repaid might be. What cannot be repaid won't be. Not ever. And that's what depressions in real capitalist economies are for: quick, dirty and nasty little episodes of failure which reset the chess board. Except we can't seem to accept that because we're not really a capitalist society anymore, which is why this sorry tale keeps dragging on.

Federal Reserve Discount Window Aided Many Banks Which Failed Anyway

So says another in a long line of incriminating stories in The New York Times, highlighting the pervasive involvement of the US government in bailing out failing institutions and implicating it in the spread of moral hazard to the highest levels of American banking:

More than one thousand banks have taken advantage [of the discount window during the financial crisis]. A review of federal data, including records the Fed released last week [by court order], shows that at least 111 of those banks subsequently failed. Eight owed the Fed money on the day they failed, including Washington Mutual, the largest failed bank in American history.

Here's the graphic from the article showcasing some of the worst offenders:

Supreme Court Rejects 8 Bank Clearing House Appeal on Loan Disclosures

The decision, which is moot as to future disclosure requirements because of the disclosure requirements under the Dodd-Frank legislation, will require that the Federal Reserve disclose loans made at the discount window in 2008. The story, excerpted below, is reported by Bloomberg here:

The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.

$9 Trillion in Fed Bailouts Saved the Elites, But $50 Billion for Unemployed Will Bankrupt Us?

Here's an excerpt from "The Con of the Century," by someone worth reading who gets it:

[U]nemployment insurance will cost roughly $4 billion per month and most of this money will go back into the economy. Congress is stalling on this yet the media is completely silent on the $9 trillion in Federal Reserve loans? This should be the headline story over and over until people realize how big the bailout was (and how this false dichotomy is being used as propaganda in the media as if $4 billion a month is going to bankrupt the system). The banking elites just want to shift the blame to “poor” people while ignoring the elephant in the room which are the trillions of dollars in Fed loans.

Here's Why Your Government Stalled on the FOIA for Two Years

Because the American taxpayer has bailed out the whole world, that's why. We're now the biggest suckers in history.

And the following information wouldn't have been released either, except for the Dodd-Frank legislation:

Citigroup ($2.2 trillion)

Merrill Lynch ($2.1 trillion)

Morgan Stanley ($2 trillion)

Bear Stearns ($960 billion)

Bank of America ($887 billion)

Goldman Sachs ($615 billion)

JPMorgan Chase ($178 billion)

Wells Fargo ($154 billion)

Swiss bank UBS ($165 billion)

Deutsche Bank ($97 billion)

Royal Bank of Scotland ($92 billion)

Fannie Mae and Freddie Mack ($1.25 trillion)

General Electric ($16 billion)

Harley-Davidson Inc. ($2.3 billion)

Caterpillar Inc. dealers ($733 million)

The story from yahoo.com is totally irresponsible for saying the Fed didn't take part in an appeal to the Supreme Court with a group of commercial banks seeking to prevent the disclosure of the names of institutions receiving emergency loans in 2008. Hell, the Fed appealed all the way up the line until it came time to appeal to the Supreme Court or comply with two (2! II! Zwei!) orders from lower courts to disclose the information. And we still don't have that.

Has anyone painted a clearer picture of the bankruptcy of our largest institutions and industries?

Only a fool would keep his money in a bank now.

Hell, only a fool would keep money.

Major Banks Appeal Federal Reserve Disclosure Ruling to Supreme Court

But the Federal Reserve did not join in the appeal, apparently in order to enhance the standing of the banks in the case.

At stake are the details of $2 trillion in Federal Reserve assistance to financial institutions beginning in late 2007 and running through the crisis of 2008, details which the Fed does not want to reveal to protect the institutions which received the dough.

Nevermind it's your money.

Down with the Fed!

Reuters.com has the story here.

US Treasury Still Stonewalling FOIA Request on Citigroup Guarantees

Twenty months and counting, including a non-response response on what securities $300 billion of taxpayer monies guarantee. It's our money! We have a right to know!

And tomorrow it will be the Federal Reserve's turn to continue the stonewalling on a separate FOIA request involving $2 trillion in taxpayer guarantees for financial institutions from two years ago, and we still don't know even though the courts have ordered the Federal Reserve to comply with the requests. When they finally do, how much do you want to bet it will be a similar non-response response?

No wonder the people want the Federal Reserve abolished, and the Treasury to burn down.

Bloomberg, which supports the FOIA requests, has the full story here.

Federal Reserve Given Until October 19 To Appeal To US Supreme Court

Bloomberg.com reported on August 27th that the Federal Reserve has won yet another reprieve as it seeks to escape rulings requiring it to comply with a Freedom of Information Act request for the names of firms receiving approximately $2 trillion in taxpayer loans:  

The Federal Reserve Board was given 60 days to decide whether to take a Freedom of Information Act case to the U.S. Supreme Court or disclose documents about loans it made to banks during the credit crisis.

The U.S. Court of Appeals in New York today acceded to the Fed’s request to delay implementation of a ruling that compels the central bank to release the reports, giving the bank until Oct. 19 to appeal. The clock began to run on Aug. 20 when the court refused to revisit its earlier ruling against the Fed.

At issue are 231 “term sheets” documenting Fed loans to financial firms during 2008. The records, which include the banks’ names and the amounts borrowed, were originally requested by the late Bloomberg News reporter Mark Pittman through the FOIA, which allows citizens access to government papers.

Expect an appeal to be filed by the Fed on the Oct. 19 deadline to avoid if at all possible having to disclose the explosive information before the Nov. 2 midterm elections.

The complete story is available here.

Federal Reserve Appeal Denied, Continues to Stymie to Protect Banksters

Bob Ivry for Bloomberg News is reporting that the Federal Reserve's appeal in May of a March ruling requiring the Fed to disclose information under the Freedom of Information Act has been denied as of August 20:

The full U.S. Court of Appeals in New York, in a docket entry dated Aug. 20, denied a May 4 request by the Fed to review a three-judge panel’s unanimous March 19 decision requiring the agency to release records of the unprecedented $2 trillion U.S. loan program begun primarily after the 2008 collapse of Bear Stearns Cos.

Unless the court stays its decision, the Fed will have seven days to disclose the documents. In the event of a stay, the central bank and the Clearing House Association LLC, an organization of 20 commercial banks that joined the Fed in defense of the lawsuit, will have 90 days to petition the Supreme Court to consider their appeal. The Clearing House has already said it will ask the high court to rule on the case. ...

The amount the Fed and the U.S. government lent, spent and guaranteed to stem the recession and rescue the banking system peaked in March 2009 at $12.8 trillion, most of it following the September 2008 bankruptcy of Lehman Brothers Holdings Inc.

Go here for complete coverage by Bloomberg.

Tim Geithner and Ben Bernanke Usurped The Power Of The U.S. House Of Representatives

So why aren't they in jail? They illegally bought trash loans and credit default swaps with taxpayer money and without congressional authorization. The Fed is permitted to buy only government-backed securities. If government disobeys the law, what's treason? Why should Joe American obey any of the laws of this land when its highest ranking officials don't? Aren't these "high crimes and misdemeanors"? Karl Denninger wants to know, here:

THE FED ADMITS TO BREAKING THE LAW

Now how long will it be before something is done about it?

April 1 (Bloomberg) -- After months of litigation and political scrutiny, the Federal Reserve yesterday ended a policy of secrecy over its Bear Stearns Cos. bailout.

In a 4:30 p.m. announcement in a week of congressional recess and religious holidays, the central bank released details of securities bought to aid Bear Stearns’s takeover by JPMorgan Chase & Co. Bloomberg News sued the Fed for that information.

The problem is this: The Fed is not authorized to BUY anything other than those securities that have the full faith and credit of The United States.

In addition Ben Bernanke has repeatedly claimed that these deals would not cost anyone money. But the current value looks differently:

Assets in Maiden Lane II totaled $34.8 billion, according to the Fed, which set their current market value in its weekly balance sheet at $15.3 billion. That means Maiden Lane II assets are worth 44 cents on the dollar, or 44 percent of their face value, according to the Fed.

Maiden Lane III, which has $56 billion of assets at face value, is worth $22.1 billion, or 39 cents on the dollar, according to the Fed’s weekly balance sheet. A similar calculation for the Bear Stearns portfolio couldn’t be made because of outstanding derivatives trades.

In other words, they have lost more than half of their value.

This was and remains a blatantly unlawful activity.

The Fed has effectively usurped Article 1 Section 7 of The Constituion which reads in part:

All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

The Fed effectively appropriated taxpayer funds without authorization of Congress. At the time these facilities were put in place neither TARP or any other Congressional authorization existed for them to do so, and to date no bill has been put through Congress authorizing the expenditure of taxpayer funds, either through putting them at risk or via outright expense, for this purpose.

Nor does it stop with a "mere" Constitutional violation - The Federal Reserve Act's Sections 13 and 14 do not permit Fed asset purchases except, once again, for items carrying "full faith and credit" guarantees. Credit-default swaps and trash mortgages most certainly do not meet these qualifications.

I know I've harped on this for more than two years, but here we have a raw admission of exactly what was done - and there is simply no way to construe any of it in a light that conforms with either The Constitution or black-letter statutory law.

What's worse is that Tim Geithner, head of the NY Fed at the time, was very much involved in this - that is, he in effect personally, along with Ben Bernanke, usurped the power of the United States House.

The Fed has spent two years trying to hide this from the public and Congress. It has fought off both Congressional demands for disclosure and multiple FOIA lawsuits, the latter of which has resulted in a series of adverse rulings (and, it appears, was ultimately going to force disclosure anyway.)

These actions are unacceptable but promising "never to do that again" is insufficient. In a Representative Republic where the rule of law is supposed to be paramount - that is, where we do not crown Kings and relegate everyone else to the status of knaves, unlawful actions such as this demand that strong and unmistakable sanction also be applied to all wrongdoers in addition to protection against future abuse.

In this case this means that both Geithner and Bernanke must go - for starters.

Amending The Federal Reserve Act of 1913 (as Chris Dodd has proposed to prevent future lending bailouts) is not sufficient in that The Fed did not lend in this case, it purchased, and by buying what we now know were trash loans it violated the black letter of existing law.

There is only one effective remedy for an institution that has proved that it will not abide the law: it must be stripped of all authority that has been in the past and can be in the future abused.

This means that The Fed, if we are to keep it at all, must be relegated to a body that only practices and provides monetary policy - nothing more or less - and that all monetary operations must be performed openly, transparently, and within those constraints.

We cannot have a republic where an unelected body is left free to violate The Constitution with wild abandon and those acts are then allowed to stand.

One final thought: If the individuals responsible for this blatant black-letter violation of the law do not face meaningful sanction for these acts, and neither does The Fed as an institution, can you fine folks over at The Executive, Judiciary and Legislative branches of our government please explain to us ordinary Americans why we should obey any of the laws of this land when you will not enforce the laws that already exist?

Feds Must Disclose Where Over $2 Trillion Of Taxpayer Money Has Gone

And I'll bet you didn't know it was missing! The courts have spoken twice, but expect more delaying tactics by the Fed. Excerpts from the Bloomberg.com story as posted here follow:

The US Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion US loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released. ...

The US Freedom of Information Act, or FOIA, “sets forth no basis for the exemption the Board asks us to read into it,” US Circuit Chief Judge Dennis Jacobs wrote in the opinion. “If the Board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute.” ...

“We’re obviously pleased with the court’s decision, which is an important affirmation of the public’s right to know what its government is up to,” said Thomas Golden, a partner at New York-based Willkie Farr & Gallagher LLP and Bloomberg’s outside counsel. ...

Lawyers for Bloomberg argued in court that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money.

“Bloomberg has been trying for almost two years to break down a brick wall of secrecy in order to vindicate the public’s right to learn basic information,” Golden wrote in court filings. ...

The Fed’s balance sheet debt doubled after lending standards were relaxed following Lehman’s failure on Sept. 15, 2008. That year, the Fed began extending credit directly to companies that weren’t banks for the first time since the 1930s. Total central bank lending exceeded $2 trillion for the first time on Nov. 6, 2008, reaching $2.14 trillion on Sept. 23, 2009. ...

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, US Court of Appeals for the Second Circuit (New York).