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Sat Mar 10, 2012, 09:34 PM

 

Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts

~~(posted earlier by DU member "GopperStopper2680", but in the wrong forum)~~

The Goverment Accountability Office-the Congressional arm of Congress which investigates how governmental money is spent-has for the first time in its nearly one hundred year history performed an audit of the Federal Reserve. The audit was requested by Ron Paul, Jim DeMint and Bernie Sanders primarily, with some others under the Dodd-Frank bill which was passed last year. And what they found while sadly, was not truly unexpected (at least by me) was a livid and scarlet outrage.

It turns out that in a clear act of 'elitist socialism' the American Mega Banks have been bailing out other richsters in foreign countries to the tune of 16 trillion dollars of OUR money-all without any form of oversight, accountability, or even a vote! This kind of unilateral nepotism among the world's power elite is a truly terrifying thing to behold.

According to the article which I found posted here:

http://www.unelected.org/audit-of-the-federal-reserve-reveals-16-trillion-in-secret-bailouts

The audit was not comprehensive but was a watered down version of what was originally planned. Paul and others plan to seek a more comprehensive audit next year.
The big question then becomes "So now we know what's going on-what are we going to do about it?" Sadly, the answer most likely will be 'nothing' or at most very little. These globalist pseudo-aristocrats have long existed in a shroud of non-culpability and continue to exist in the notion of personal invincibility and immunity from the law. We as taxpayers and responsibile citizens have a right and an obligation to stand up to the government and DEMAND that they take some form of relevent action appropriate to the nature and scale of the crime. After all our nations Founders created a system on the grounds of 'Rule of Consent by the Governed' not 'Consent to Rule by the Rich'. "A Sheepish population will have a wolfish government" after all as the quote goes.

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Reply Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts (Original post)
NYC_SKP Mar 2012 OP
orpupilofnature57 Mar 2012 #1
HereSince1628 Mar 2012 #2
Scuba Mar 2012 #25
ArcticFox Mar 2012 #3
orpupilofnature57 Mar 2012 #4
valerief Mar 2012 #30
99th_Monkey Mar 2012 #5
NYC_SKP Mar 2012 #6
99th_Monkey Mar 2012 #10
raging_moderate Mar 2012 #21
Pilotguy Mar 2012 #7
muriel_volestrangler Mar 2012 #18
Samantha Mar 2012 #8
cheapdate Mar 2012 #9
n2doc Mar 2012 #11
cheapdate Mar 2012 #12
saras Mar 2012 #32
girl gone mad Mar 2012 #15
dixiegrrrrl Mar 2012 #17
cheapdate Mar 2012 #22
solarman350 Mar 2012 #13
Festivito Mar 2012 #14
Taitertots Mar 2012 #16
leveymg Mar 2012 #19
Taitertots Mar 2012 #20
Lucky Luciano Mar 2012 #24
leveymg Mar 2012 #31
Lucky Luciano Mar 2012 #33
leveymg Mar 2012 #36
Lucky Luciano Mar 2012 #37
leveymg Mar 2012 #40
bhikkhu Mar 2012 #35
joanbarnes Mar 2012 #23
NYC_SKP Mar 2012 #26
grahamhgreen Mar 2012 #27
Lucky Luciano Mar 2012 #28
NYC_SKP Mar 2012 #29
Lucky Luciano Mar 2012 #34
NYC_SKP Mar 2012 #38
Fearless Mar 2012 #39

Response to NYC_SKP (Original post)

Sat Mar 10, 2012, 09:38 PM

1. Bankrolling our own demise ,Thanks Shrub.

 

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Response to NYC_SKP (Original post)

Sat Mar 10, 2012, 09:45 PM

2. Now I understand why we are fighting over there...it's for for petroleum

jelly. So that it doesn't hurt so much next time the banks sodomize us.

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Response to HereSince1628 (Reply #2)

Sun Mar 11, 2012, 01:04 PM

25. DUzy.

 

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Response to NYC_SKP (Original post)

Sat Mar 10, 2012, 09:47 PM

3. Mass embezzlement

Just like massive fraud, if your crime is big enough, you'll do no time.

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Response to ArcticFox (Reply #3)

Sat Mar 10, 2012, 09:54 PM

4. Ask Shrub ,Kitten eater ,and Kkkarl

 

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Response to ArcticFox (Reply #3)

Sun Mar 11, 2012, 03:51 PM

30. One murder a villain, millions a hero. Numbers sanctify, my good fellow.--M. Verdoux

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Response to NYC_SKP (Original post)

Sat Mar 10, 2012, 10:32 PM

5. Gadzooks! that's almost exactly the size of the US national debt.

 

http://www.brillig.com/debt_clock/

How interesting is that??

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Response to 99th_Monkey (Reply #5)

Sat Mar 10, 2012, 11:29 PM

6. Wow.

 

And crap, we could be solvent but for the criminals in DC.

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Response to NYC_SKP (Reply #6)

Sat Mar 10, 2012, 11:50 PM

10. And then if the Pentagon could find their missing 2.3 Trillion$, we'd have a surplus. ~nt

 

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Response to 99th_Monkey (Reply #5)

Sun Mar 11, 2012, 11:09 AM

21. Let me see, per capita that works out to....

one trillion = 1000 x 1 billion, x 16 then divide by 320 million US citizens and you get...wait for it...

$50,000 per every man woman and child in the good old USofA. That means $200,000 for my family of four. Glad I could do my part in spreading the American Dream.

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Response to NYC_SKP (Original post)

Sat Mar 10, 2012, 11:31 PM

7. I may be wrong...

...but I read somewhere recently that it's not really a total of $16 trillion. It's the same trillion dollars going back and forth between the Fed and the borrowers 16 times. I'll try to post a link to where I read that if I can find it.

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Response to Pilotguy (Reply #7)

Sun Mar 11, 2012, 09:42 AM

18. It's in the report, right at the start

On numerous occasions in 2008 and 2009, the Federal Reserve Board invoked
emergency authority under the Federal Reserve Act of 1913 to authorize new
broad-based programs and financial assistance to individual institutions to
stabilize financial markets. Loans outstanding for the emergency programs
peaked at more than $1 trillion in late 2008.

http://www.sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf


The outstanding balance in June 2011, when the report was written, was about $965 billion, nearly all ($909 billion) in the Agency Mortgage-Backed Securities Purchase Program.

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Response to NYC_SKP (Original post)

Sat Mar 10, 2012, 11:36 PM

8. No problem - half of this can be recouped by simply defaulting on Uncle Sam's debt to

its domestic bond holders, almost five trillion dollars alone is owed to the Social Security Trust Fund and the Medicare Trust fund. Just privatize these two programs alone and that will relieve about five Trillion Dollars, and perhaps do away with entities like the U.S. Post Office which has overpaid its medical and pension fund obligations for the next 75 years, throw in raiding Government employees pension funds, and you can offset probably about half of this.

Sam

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Response to NYC_SKP (Original post)

Sat Mar 10, 2012, 11:43 PM

9. This stuff makes my head hurt, but...

It's "our" money only in the sense that it's US dollars that the Fed is "loaning" out. The borrowers, or recipients of the Fed's largesse are on the hook to the Fed. It doesn't involve the US government's accounts, at least not directly.

An alternative is to pass legislation to take control of monetary policy away from the Fed and give it to congress and the government. I'm not sure which is worse. If every order from the Fed for federal reserve notes had to wait for congressional approval, I'm not sure how well that would work either.

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Response to cheapdate (Reply #9)

Sun Mar 11, 2012, 12:03 AM

11. It wouldn't work at all

Boner would hold the fed hostage in order to defund planned parenthood or some other RW crap. He doesn't need more hostages.

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Response to n2doc (Reply #11)

Sun Mar 11, 2012, 12:33 AM

12. Exactly. A guaranteed clusterf&%$.

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Response to n2doc (Reply #11)

Sun Mar 11, 2012, 04:26 PM

32. Boner can go jump out a window the way Bush's enemies used to...

 

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Response to cheapdate (Reply #9)

Sun Mar 11, 2012, 03:51 AM

15. If any of the Federal Reserve's loans go bad, the US Treasury is on the hook..

for the extra interest costs, with no offsetting receipts.

In other words, any losses by the Fed are the equivalent of a fiscal expenditure financed by Treasury borrowing.

And actually, last year the Fed started directly recording all of their losses onto the Treasury's books in an effort to make their own balance sheet look nicer.

http://www.reuters.com/article/2011/01/21/us-usa-fed-accounting-idUSTRE70K6OK20110121

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Response to girl gone mad (Reply #15)

Sun Mar 11, 2012, 09:39 AM

17. Good catch.

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Response to girl gone mad (Reply #15)

Sun Mar 11, 2012, 11:36 AM

22. "An accounting methodology change"

"The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability."


"The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability."


It sounds like it's not exactly the same as treasury borrowing. It's an accounting change at the Fed. Fed losses will show up as borrowing on the Fed's books and not the Treasury's books.

This is possibly a disaster in the making. It sounds like they've untethered themselves from reality.

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Response to NYC_SKP (Original post)

Sun Mar 11, 2012, 01:24 AM

13. Occupy the World--May Day 2012

 

Proposal in support of May Day 2012

This is a proposal for OWS to adopt this exact language for May Day 2012:

May Day 2012 Occupy Wall Street stands in solidarity with the calls for a day without the 99%, a general strike and more!! On May Day, wherever you are, we are calling for:
.
*No Work *No School*No Housework *No Shopping *No Banking TAKE THE STREETS!!!!!
.
http://www.occupytogether.org




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Response to NYC_SKP (Original post)

Sun Mar 11, 2012, 01:27 AM

14. That's only $50,000 for every man, woman and child in America.

Yikes.

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Response to NYC_SKP (Original post)

Sun Mar 11, 2012, 08:58 AM

16. That is an intelectually dishonest and misleading article

 

The number given is the sum of three years of overnight lending.

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Response to Taitertots (Reply #16)

Sun Mar 11, 2012, 09:43 AM

19. How dishonest or misleading? What's the normal flow of Fed Funds to Primary Dealers?

There is no doubt that there was a huge increase of lending at the NY Fed Overnight Window at reduced real rates on the basis of bogus collateral, such as CDS and defaulted bundled mortgages and strips that were not previously accepted. This has created tremendous systemic risk, which no one talks about. Also, a large percentage of QE2 went to foreign banks. So what's dishonest?

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Response to leveymg (Reply #19)

Sun Mar 11, 2012, 10:10 AM

20. It is dishonest because the total given is the sum of multiple consecutive overnight loans

 

I could hand my roomate the same $20 everynight for fifty nights and take it back every morning; but that doesn't mean I just gave him $1,000. I'm sure he would think it was dishonest if I tried to claim I had given him $1,000.

The Fed should be increasing lending at reduced rates during an economic crisis. They should be accepting troubled assets as collateral. That is how we reduce the systemic risk, this doesn't increase systemic risk.

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Response to Taitertots (Reply #20)

Sun Mar 11, 2012, 12:13 PM

24. Crickets....

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Response to Taitertots (Reply #20)

Sun Mar 11, 2012, 04:19 PM

31. $16T is equal to the GNP of the US. Nobody who understands this thinks the Fed handed a lump sum

loan that large. But, cumulative flow of funds - paid out in many smaller tranches over a couple years, an exchange of "good money for bad", literally - does impact the systemic risk of the banking system, quite dramatically. It shows up long-term as increased costs for imported commodities, relative currency devaluation, reduced consumer lending, higher risk premiums, etc. - the costs are cumulative, just as was the payout of the QE2 bailouts and incentives to global institutions to remain in US markets.

Some of that $16T was normal Fed operations, but QE2 was essentially a bribe to prevent flight of capital abroad.

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Response to leveymg (Reply #31)

Sun Mar 11, 2012, 06:53 PM

33. Then don't use the $16T figure.

Give a more meaningful figure. $5T in FX spot trades occur every day too. Every three days is our GDP. Overnight loans with the Fed trade like water too. You really need a figure in excess of what is normal that was based on bad collateral. Even then, it is not the loan amounts that matter. What matters is the amount of interest the Fed did not earn by lending with a lower rate than they should have based on the questionable collateral and credit quality of the borrower. Do that and the bailout drops to 10s of billions maybe. If you offset that with tax receipts from unemployment not going to 25%, then those few billion were an investment that needed to be made.

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Response to Lucky Luciano (Reply #33)

Sun Mar 11, 2012, 07:23 PM

36. The $16T figure is a useful figure to show the extent of federal injection of liquidity to banks '08

to '11. I agree the overage is the more significant figure for analysis. But, what about the lost use value of those funds that went to big New York Fed banks - $5 trillion seems a reasonable guestimate. We're not just talking about the direct interest on that money - we're taking about use value. That money could have gone instead to fund a whole series of bottom-up initiatives that would have benefited middle-class persons five, ten-fold more greatly than just subsidizing the bottom line of big global financial firms.

We have a fundamental disagreement about how the Fed should have approached the bail-out. You're fine with bouying the parties that created the process - I think those funds could have much better gone to build public trusts, credit unions and other institutions that deal with people rather than multinational corporations.

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Response to leveymg (Reply #36)

Sun Mar 11, 2012, 08:45 PM

37. I don't wholly disagree with you that the middle

class should have been bailed out (besides preventing unemployment from going to 25% which the Fed did help with). I do think the bailout you describe should have been in the stimulus, but the thugs in Congress did what they could to block that.

The $5T you cite is very spurious. I would say $100B tops, but probably much less than that. A real analysis is hard to do without an army and access to a lot of info.

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Response to Lucky Luciano (Reply #37)

Mon Mar 12, 2012, 08:37 AM

40. It doesn't take an act of Congress to redirect Fed liquidity measures from global banks to

strengthen the lending ability of credit unions, community loan funds, and other financial industries that deal more directly with the general public and small businesses.

The inadequate stim is a separate issue, and that was more about the GOP politics of obstruction.

It would have taken a change at the head of Treasury, the WH council of economic advisors, and perhaps at or in the head of the Federal Reserve to redirect the flow of QE2 funds, or to place conditions upon them, such as increased small business lending for jobs expansion, which is within the ambit of the Fed. But, those changes and conditions weren't made, so we got what we did - and, we seem stuck with structural unemployment above 8 percent -- the "new normal" -- as a result.

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Response to leveymg (Reply #19)

Sun Mar 11, 2012, 07:04 PM

35. It might also add that all the sums were paid back

...which kind of takes the edge off the "16 TRILLION!" thing. The one legitimate complaint about the program is that the loans were at a lower-than-market rate, which might not have been absolutely necessary. If the loans were at market rates, then the program might have made some millions more in interest...I forget the exact figure, but it wasn't huge in perspective.

The one other annoying thing about the story is, if anyone has been paying attention, the whole "secret loans revelation" meme has been trotted out regularly since shortly after the program was announced (very publicly) in 2008. A quick google search brings up lists of articles from here to then, though it seems there are still enough journalists around who's google-buttons are broken, and who never heard or the TARP program before, to keep the meme going with each new independent discovery.


edited to correct: not all the sums have been paid back. There are supposed to be a few billion still unpaid, but these were to banks on the edge of failure that haven't quite failed yet, but probably will. At which point the FDIC covers the sums outstanding, and then its more or less a wash as they would have had to anyway.

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Response to NYC_SKP (Original post)

Sun Mar 11, 2012, 11:47 AM

23. Wouldn't that cover our "deficit" with a few tril left over?

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Response to joanbarnes (Reply #23)

Sun Mar 11, 2012, 01:55 PM

26. Not sure, from some of the replies maybe not all 16T are outstanding loans.

 

But rather loans made over time and many repaid.

But I'm not sure.

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Response to NYC_SKP (Original post)

Sun Mar 11, 2012, 02:19 PM

27. This is all to prop up $1 QUADRILLION in VAPOR derivatives. (yes quadrillion)

 

"Do you know how large one quadrillion is?

Counting at one dollar per second, it would take 32 million years to count to one quadrillion.

If you want to attempt it, you might want to get started right now.

To put that in perspective, the gross domestic product of the United States is only about 14 trillion dollars.

In fact, the total market cap of all major global stock markets is only about 30 trillion dollars.

So when you are talking about 1.5 quadrillion dollars, you are talking about an amount of money that is almost inconceivable.

So what is going to happen when this insanely large derivatives bubble pops?"

http://english.pravda.ru/business/finance/09-08-2010/114539-financial_system-0/

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Response to grahamhgreen (Reply #27)

Sun Mar 11, 2012, 02:43 PM

28. It is more like $700T last I checked....but

Those are only notional amounts - NOT dollars at risk. Massive difference. Interest rate swaps represent half that notional. Swapping fixed rate payments for floating LIBOR based payments on $100mm notional is not worth $100mm. If the IRS has a 5 year term, rates would have to immediately move 22.5% or so for the swap which starts with zero value to be worth $100mm for the fixed rate payer.

Bottom line is notional is misleading. After netting contracts and calculating their value, all those vapor derivatives are only worth $5T or so - that is still plenty to fuck things up though. The big crash a few years ago resulted in write downs of $2-3T.

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Response to grahamhgreen (Reply #27)

Sun Mar 11, 2012, 03:47 PM

29. Can we eliminate the derivatives market?

 

Or is it an unregulated monster who will only ever die under it's own weight, after a world collapse of the economy?


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Response to NYC_SKP (Reply #29)

Sun Mar 11, 2012, 06:57 PM

34. Do you have a variable annuity?

That is actually a very complex derivative actually. Insurance companies that sell them need to hedge their exposures. Pension may need to hedge their future obligations and interest rate risks. Interest rate swaps are the best way to hedge that rate risk - that is half the notional amount in the derivatives market.

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Response to Lucky Luciano (Reply #34)

Sun Mar 11, 2012, 09:00 PM

38. Not sure, I have a matching donation by one employer to a AIG account, and STRS retirement.

 

I wouldn't be surprised if the AIG-Valic account is involved in derivatives.

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Response to NYC_SKP (Original post)

Sun Mar 11, 2012, 09:05 PM

39. Socialism? Someone really needs to look up the definition of socialism...

It's like calling the president a socialist fascist... "elite socialism" is impossible.

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