How much did “too big to fail” cost behind closed doors?
The Federal Reserve bailed out dozens of banks and brokerage firms starting in 2007, from Bank of America to Morgan Stanley as a means of curbing economic collapse. Taxpayer dollars were used to fund several gigantic financial institutions so America wouldn’t go into a depression.
Bloomberg.com obtained loan information through the Freedom of Information Act and is reporting that Morgan Stanley received $107.3 billion as the largest beneficiary and revealed that nearly half of the top 30 institutions that were given funding were based in Europe.
$1.2 trillion to banks
The biggest shock of the report is that the total outstanding balance of the loans hit $1.2 trillion in December 2008.
“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” James Clouse, deputy director of the Fed’s division of monetary affairs in Washington told Bloomberg. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.”
Small businesses betrayed, big banks propped up
The growing consensus is that small businesses were left out to dry as a recession rolled into America, and big banks and firms were given trillions to stay afloat.
“Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?” U.S. Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. “They get help when the average businessperson down in eastern North Carolina, and probably across America, they can’t even go to a bank they’ve been banking with for 15 or 20 years and get a loan.”
TARP funds only total $700 billion and are very controversial
Regulators are “not going to go far enough to prevent this from happening again,” said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University.
To put the funds in perspective, Bloomberg notes that TARP funds only totaled $700 billion, making the $1.2 trillion bank bailout that is just now publicly revealed substantially bigger than the TARP program, substantial for its use and size.
Darian
August 24, 2011 at 1:50 pm
Can you spell P-L-U-T-O-C-R-A-C-Y ?
I knew you could.
Private interests have decimated this nation.
They are the ones that owe us now.
Rainer
August 25, 2011 at 8:04 am
Actually, true anger about this comes from a lack of understanding about the Fed. The Fed was designed to do things like this. It can make money appear out of thin air, and done right, can stem the tide of bank failures. The Fed did exactly what it should have done. Those loans are extremely short term.
If you want something to be angry about, be angry at the Sarbanes-Oxley bill that created the mortgage crisis to begin with. It required banks to post offsetting funds when their portfolio asset values declined. However, the.funds weren't used for anything. It just sat in a bank account. It's stupid accounting designed by politicians who are mostly lawyers and not accountants.
So, no, there isn't a plutocracy. And this money couldn't go to small biz. The Harvard professor knows the difference and is just trying to get headlines. The fed can only lend money to federally chartered banks and a handful of other institutions.