It was back in August that Bloomberg revealed that the Fed gave $1.2 trillion in secret loans to the very banks that caused the financial crisis– roughly the same amount that homeowners owed to the very same banks. Sunday, Bloomberg dropped the rest of the story: that banksters made about $13 billion of income off below-market rates on the Fed’s under-the-table loans.
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, 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.
The "Big Six" – the banks that borrowed the most from the Fed – reads like a roll call Wall Street’s worst offenders. As Jeffrey Sachs writes, "Virtually every marquee firm on Wall Street, including Citigroup, Goldman Sachs, and JP Morgan, committed financial fraud."
The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment.
The six — JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley — accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.
One of the biggest was Bank of America – the same bank that earned $3.1 billion last year, whose CEO (after pulling down $10 million last year) declared a "right to make a profit" by fleecing its customers a $5-out-of-a-month fee for the privilege of using their own money, and was incensed when bank customers had the nerve to complain about it.
This is the same Bank of America that:
- Made $4.5 billion from its customers by processing debit card transactions to maximize over draft charges, and only had to pay back $410 million.
- Engaged in robo-signing that resulted in fraudulent foreclosures
- "Significantly hindered" a federal investigation into its robo-signing practices.
Now we know that BOA also made some of its profits by using taxpayer loaned to it by the FDIC, under-the-table and with no strings attached.
Citigroup, another "Bix Six" borrower bank, just had its $285 million settlement with the SEC for defrauding investors thrown out by a judge, because it effectively lets Citigroup off the hook.
And then there’s Goldman Sachs. Where does one begin?
The SEC charged Goldman with fraud, and they settled the suit by admitting their marketing materials contained lies – which they called "mistakes." They were fined by Great Britain for illegally concealing US fraud investigations. Goldman has its own gender discrimination lawsuit, too, and theirs comes complete with strippers and racist emails.
Goldman’s being sued for deceiving its clients over an offering its own employee privately (and thanks to Sen. Levin, famously) bragged was "a shitty deal." Goldman separately paid $60 million in Massachusetts to settle charges of predatory loan practices.
After mismanagement drove Goldman into impending doom, the firm was saved by TARP funds and Federal Reserve’s Emergency Liquidity Programs. Total taxpayer aid to Goldman exceeded three-quarters of a trillion dollars. Goldman also received $13 billion in backdoor payouts through the AIG liquidation (under Tim Geithner’s supervision).
Rap Sheet: Fraudulent misrepresentation; predatory loan practices; illegal concealment of an investigation. And who know what else. They’re Goldman, man!
Shameless Quotes: "We’re very important … We do God’s work." (Goldman CEO Lloyd Blankfein) "If I whet My glittering sword, and Mine hand take hold on judgment; I will render vengeance to Mine enemies." (God)
Think about it for a minute, and if you’re blood doesn’t star to boil consider that – as Leo Gerard points out – the whole point of the recently failed "supercommitte" was to find about $1.2 trillion in cuts over ten years.
The committee was searching for $1.2 trillion over 10 years. The Bush tax cuts, which disproportionately benefitted the rich, cost $2.8 trillion over the past decade. But the 1 percent obstructed a return to the pre-Bush-balanced-budget-era tax rates and would sneer at the mere suggestion that they pay the much higher marginal rates the wealthy accepted after World War II to settle those government debts. In fact, Republicans on the Super Committee actually proposed additional tax cuts for the rich.
More breaks for the wealthy would require slashing social safety net programs for the 99 percent — Social Security, Medicare, Medicaid, Head Start, child nutrition. It would mean no funds to create jobs and boost the economy. The result would be less money to build highways, refurbish bridges and renovate schools.
That’s okay with the 1 percent because they feel no obligation for those social responsibilities.
S, the Fed gave banks – and gave them unconditionally – roughly the same amount of money that the supercommittee wanted to apply to the deficit by slashing programs for the 99 percent, rather than raise taxes on the one percent. And in case you’re wondering, Wall Streeters pretty much are the one percent.
The Occupy Wall Street protesters have focused attention on rising income inequality in the United States, and they are right to do so.
…Why have incomes of those in the top 1 percent soared? Their occupations provide some clues. From 1979 to 2005, nonfinancial executives, managers and supervisors accounted for 31 percent of the top 1 percent, medical professionals for 16 percent, financial professionals for 14 percent and lawyers for 8 percent.
Together, executives, managers, supervisors and financial professionals accounted for 60 percent of the increase in the top 1 percent’s income, with a widening compensation differential between those in the financial sector and those in other sectors of the economy after 1990.
Superstar athletes, actors and musicians, often portrayed among the super-rich, accounted for about 3 percent of the top 1 percent from 1979 to 2005, far less than the less glamorous people (mostly men) who lead and advise America’s businesses.
Mind you, these guys already get about $30 million a year in government welfare. Yes, welfare – on top of the $1.2 trillion in taxpayer-funded loans.
Class warfare is a politically charged term these days, from the Wall Street protests to the Capitol Hill negotiations over curtailing the nation’s debt. But a new congressional analysis, obtained by Newsweek, may fuel populist outrage by showing the extent of government subsidies that go to the wealthiest people in America.
From unemployment payments to subsidies and tax breaks on luxury items like vacation homes and yachts, Americans earning more than $1 million collect more than $30 billion in government largesse each year, according to the report assembled by Sen. Tom Coburn, a Republican from Oklahoma, who is so often at odds with members of both parties that colleagues call him “Dr. No.” The Internal Revenue Service provided the data showing how much money was going to the much-referenced top 1 percent.
In all, millionaires receive hefty help from Uncle Sam. The $30 billion in handouts, to put it in perspective, amounts to twice as much as the government spends on NASA, and three times the budget of the Environmental Protection Agency. On the other hand, it would only cover the cost of fighting about three months in Iraq and Afghanistan. Still, eliminating them would help make a small dent in the $1.5 trillion congressional leaders are trying to find by Thanksgiving.
Given all of the above, it’s no wonder Occupy Wall Street resonated with so many people.
If you think of it this way, Occupy Wall Street takes on another meaning. There’s no better symbol of the gloom and psychological repression of modern America than the banking system, a huge heartless machine that attaches itself to you at an early age, and from which there is no escape. You fail to receive a few past-due notices about a $19 payment you missed on that TV you bought at Circuit City, and next thing you know a collector has filed a judgment against you for $3,000 in fees and interest. Or maybe you wake up one morning and your car is gone, legally repossessed by Vulture Inc., the debt-buying firm that bought your loan on the Internet from Chase for two cents on the dollar. This is why people hate Wall Street. They hate it because the banks have made life for ordinary people a vicious tightrope act; you slip anywhere along the way, it’s 10,000 feet down into a vat of razor blades that you can never climb out of.
That, to me, is what Occupy Wall Street is addressing. People don’t know exactly what they want, but as one friend of mine put it, they know one thing: FUCK THIS SHIT! We want something different: a different life, with different values, or at least a chance at different values.
There was a lot of snickering in media circles, even by me, when I heard the protesters talking about how Liberty Square was offering a model for a new society, with free food and health care and so on. Obviously, a bunch of kids taking donations and giving away free food is not a long-term model for a new economic system.
But now, I get it. People want to go someplace for at least five minutes where no one is trying to bleed you or sell you something. It may not be a real model for anything, but it’s at least a place where people are free to dream of some other way for human beings to get along, beyond auctioned "democracy," tyrannical commerce and the bottom line.
Not only have the banks "made life for ordinary people a vicious tightrope act," 10,000 feet above "a vat of razor blades you can never climb out of," but with the help of our government they’ve made sure those ordinary people paid for the tightrope and the razor blades, while the banks profited from it – all with the help of what’s supposed to be our government.