Fed made $9 trillion in emergency overnight loans - WOW

[Poboy]

Top recipients of overnight loans made by the Federal Reserve under special program that ran from March 2008 through May 2009.

By Chris Isidore, senior writerDecember 1, 2010: 6:05 PM ET


NEW YORK (CNNMoney.com) -- The Federal Reserve made $9 trillion in overnight loans to major banks and Wall Street firms during the financial crisis, according to newly revealed data released Wednesday. The loans were made through a special loan program set up by the Fed in the wake of the Bear Stearns collapse in March 2008 to keep the nation's bond markets trading normally.

The amount of cash being pumped out to the financial giants was not previously disclosed. All the loans were backed by collateral and all were paid back with a very low interest rate to the Fed -- an annual rate of between 0.5% to 3.5%.

Still, the total amount was a surprise, even to some who had followed the Fed's rescue efforts closely.
"That's a real number, even for the Fed," said FusionIQ's Barry Ritholtz, author of the book "Bailout Nation." While the fact that the markets were in trouble was already well known, he said the amount of help they needed is still surprising.
"It makes it very clear this was a very serious, very unusual situation," he said.

Sen. Bernie Sanders, the Vermont independent who had authored the provision of the financial reform law that required Wednesday's disclosure, called the data that was released incredible and jaw-dropping."The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution," Sanders said.

He said that even if the Fed was right to make the loans to keep the economy from toppling into a depression, it should have made stronger demands that the banks help American consumers and small businesses.

"They may have repaid their loans, but that's not good enough," he said. "It's clear the demands the Fed made were not enough."


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http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm?source=ft

[mediaman007]

1. At least the banks were able to make payroll!

[Recursion]

5. This kept the commercial paper market alive

Which meant a lot of businesses that would have literally not been able to make payroll were able to make payroll.

[rfranklin]

2. whew! Glad we're back to business as usual...

No chance of that happening again.....is there?

[XemaSab]

3. I've never heard of the Banc of America

:shrug:

[dkf]

4. If they borrowed $10 billion two nights in a row they count that as $20 billion.

Just think if all your debts were overnight loans. Your $100,000 mortgage would be $36,500,000. Well it would be a little less than that since payments are made.

[Recursion]

6. This is how investment banks are funded

Overnight loans to meet day-to-day operations costs. Actually a disturbing number of businesses work this way: just-in-time financing, which has all the weaknesses of just-in-time production and fulfillment.

[dkf]

7. Yup...this is why a credit crunch is devastating.

[Poboy]

12. Are The Banks Insolvent? Fair Question, Given This....

I've been going through The Fed's "data dump" that the WSJ has linked and made "easier" for us.
And I've got lots of questions.
Let's, for example, look at "Bank of Amer NA", otherwise known as BAC.

They used the TAF a lot. Here's a snapshot:

http://market-ticker.org/akcs-www?get_gallery=750


Pay particular attention to that pink column I highlighted.

Why?

Well, BAC borrowed $15 billion an awful lot. Maybe the same $15 billion.

Look at the face value of what they posted as collateral.

$127 billion - or in one case $185 billion - to borrow $15 billion?

What was being posted there - that's a more than 90% haircut!

That's a fairly clear declaration by The Fed that these "Assets" were worth no more than $15 billion, right? After all, that's all they got credit for when posting their collateral.

Ok, two immediate questions:

•What was that, and at what value was that carried on their balance sheet at the time?


•Where is it now and what value is it being carried at TODAY on their balance sheet?
Ah, Kemosabe, now we get to a problem, don't we? See, if BAC had to borrow $15 billion, why would they post collateral at that sort of haircut? Further, that's a God-Awful loss embedded in those instruments that's being assumed by the NY Fed and BOG and we damn well ought to know through their quarterly reports where that presumed loss of value went and where it was.

There's a problem of course - BAC never reported that sort of loss any time during this "crisis." That leaves me with the question as to where these so-called "assets" are now, what they're marked at, and whether we're still dealing with massive and outrageously bogus "marks" - that is, claims of value - in these securities!

By the way, they're not alone. Barclays has a bunch of these transactions with big haircuts too. So does Goldman, with several TSLF transactions that show $2 billion borrowed and $25 billion+ of notional value of alleged "collateral" deposited.

Then there's Wells, which has a nice single-page output that looks like this:



http://market-ticker.org/akcs-www?post=173721

[unblock]

8. this may be the most ridiculously distorted headline i've ever seen.

they counted renewals of overnight loans EACH TIME THEY RENEWED.

so "merrill lynch received $2.1 trillion, spread across 226 loans." really means they borrowed about $9.3 billion and kept it for the equivalent of 226 days.

to say that the $700 billion tarp program pales in comparison to this program is ridiculous, tarp was a far larger program, at least based on the actual numbers in this article.


talk about "how to lie with statistics". sheesh!

[SidDithers]

10. Agreed...

a very deceiving headline and article.

Sid

[tjwash]

9. LOL...posting year and a half old data that misspells "bank"

[gratuitous]

13. The year and a half old data is just being disclosed

What has happened since May 2009? We're not allowed to know. By the way, you might want to familiarize yourself with all the permutations under which the Bank of America conducts its various business, in particular Banc of America Securities, LLC (yes, it's spelled "Banc").

Got an "epic fail" poster for yourself?

[Skink]

11. This is what the fed was created for.

it's kind of like the strategic oil reserves.

[Poboy]

14. Senator Sanders- The Fed Jaw Dropper

News Dec. 2




December 2, 2010


Senator Sanders

The Fed Jaw Dropper - As financial markets imploded in 2008, the Federal Reserve opened its vault much wider than previously disclosed reaching far beyond Wall Street to manufacturers and foreign banks. "After years of stonewalling, the American people are finally learning the jaw-dropping details of the Fed's multitrillion-dollar bailouts," said Sen. Bernard Sanders, whose provision in a law required the disclosures, according to The Associated Press, The New York Times, The Washington Post, The Wall Street Journal, the Burlington Free Press, Bloomberg and McClatchy newspapers. LINK, LINK, LINK, LINK, LINK, LINK and LINK

Twin Bailouts - In the LA Times and Chicago Tribune, Sanders said the Fed's "backdoor bailout" dwarfed the $700-billion Treasury Department program to bail out banks, automakers and the giant insurer American International Group Inc. AFP said he called that program "pocket change" by comparison. "How many big banks repaid Treasury Department bailouts in order to avoid limits on executive compensation received no-strings attached loans from the Federal Reserve?" he asked in The Christian Science Monitor. LINK, LINK and LINK

Credit Card Scam - Sen. Sanders told CNN's Eliot Spitzer that the new details on the Fed's actions during the financial crisis reveal poor judgment.

"You got credit card companies that were substantially helped by the bailout saying, ‘oh thank you very much for helping us out, now we're gonna charge you 25 or 30 percent interest rates,'" Sanders told "Parker Spitzer." Even if the Fed was right to make the loans to keep the economy from toppling into a depression, Sanders told CNN it should have made stronger demands that the banks help American consumers and small businesses. LINK, LINK and VIDEO

Shell Games - In a conference call with reporters, Sanders said he would investigate whether beneficiaries of low-cost Fed loans used the funding to buy Treasury debt with higher interest rates, thereby turning a profit on the difference, according to the Bureau of National Affairs. LINK

World Bank? - The senator expressed surprise at the number of international banks that received loans, according to Canada's Globe and Mail. "Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations," Sanders told AFP. "Has the Federal Reserve of the United States become the central bank of the world?" he asked in the Financial Times. Sanders said it was "incomprehensible" that the general public did not know who the Fed lent to during the crisis, according to the London Telegraph. LINK, LINK, LINK and LINK

Kudos from Capitalists - Sen. Sanders "insisted that the Dodd-Frank financial bill require more transparency about how the Fed allocated capital during the panic. The release of this data on some 21,000 Fed transactions over the last three years is one of the rare useful provisions in Dodd-Frank, but kudos to our favorite Socialist for demanding it," The Wall Street Journal said in an editorial. LINK


http://sanders.senate.gov/newsroom/news/?id=CD093B4C-2DDA-4292-92F2-214A3A75493C

[The Northerner]

15. K&R

[Poboy]

16. .