Bloomberg demanded to know. The media publisher has been fighting the Federal Reserve to find out who received glorified interest-free money via the discount window during the 2008 financial crisis. After over two years of legal maneuvering and a Supreme court decision, Bloomberg finally found out, 2 CDs, 894 pdfs and 29,000 pages worth of finding out.
It ain't pretty. Foreign Banks got most of the money.
The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record.
It's astounding, why would the Federal Reserve be bailing out China, Libya and European banks?
Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch from the Fed’s “discount window” lending program, according to Fed documents released yesterday in response to a Freedom of Information Act request. Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion.
Especially why would the Fed loan $300 billion to Dexia SA who is implicated in defrauding taxpayers? Why would the United States be lending at zero interest, money to China at all?
Bank of China, the country’s oldest bank, was the second- largest borrower from the Fed’s discount window during a nine- day period in August 2007 as subprime-mortgage defaults first roiled broader markets. The Chinese bank’s New York branch borrowed $198 million on Aug. 17 of that month.
Zerohedge has some of the borrowers and amounts details. In spite of losing a Supreme Court case, it appears the Fed. requires you to fill out a form to get the information directly. We put up one spreadsheet here.
Senator Bernie Sanders asked the Fed why Libya received discount window loans?
Sen. Bernie Sanders (I-Vt.) today questioned why the Federal Reserve provided more than $26 billion in credit to an Arab intermediary for the Central Bank of Libya.
The total includes at least $3.2 billion in loans that the Fed was forced to make public today in addition to earlier revelations under a Sanders provision in the Wall Street reform law.
Sanders also asked why the Libyan-owned bank and two of its branches in New York, N.Y., were exempted from sanctions that the United States this month slapped on other Libyan businesses to pressure Col. Moammar Gadhafi’s government.
“It is incomprehensible to me that while creditworthy small businesses in Vermont and throughout the country could not receive affordable loans, the Federal Reserve was providing tens of billions of dollars in credit to a bank that is substantially owned by the Central Bank of Libya,” Sanders said.
In a letter to Federal Reserve Chairman Ben Bernanke and others, Sanders asked why the central bank made at least 46 emergency, low-interest loans to the Arab Banking Corp., in which the Central Bank of Libya owns a 59 percent stake.
Sanders also asked the question we've said repeatedly, how can one lend money to one branch of the government and the other borrow money from another branch and call this anything but a glorified Ponzi Scheme?
The Fed loans, at interest rates as low as 0.25 percent, relied on U.S. Treasury securities as collateral. In other words, at the same time that the Arab Banking Corp. was borrowing money at almost zero interest from one arm of the government, the Fed, it was lending money at a higher interest rate to another arm of the U.S. government, the Treasury Department.
Rolling Stone Journalist Matt Taibbi is pouring over the 21,000 transactions and found this gem. We have housewives of Wall Street executives getting bank bail out money.
Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?
We kid you not. The Federal Reserve made it possible for rich housewives to get free money.
Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan's penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment.
Here are some more details ferreted out. Seems everyone got a piece except the American people.
The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. "Our jaws are literally dropping as we're reading this," says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. "Every one of these transactions is outrageous."
So, why then, isn't all of Congress in an uproar, with only Bernie Sander's office and Ron Paul really speaking up?
Normally I find most of Ron Paul's positions odious and economic fiction, yet his statement on this report really calls cash on the absurdity of the Federal Reserve funding a terrorist state.
There are other suspicious and insidious discount window borrowings as well. For example, one of the top 5 discount window loan recipients, Wachovia, borrowed while being acquired by Wells Fargo:
Wachovia Corp borrowed $29 billion from the discount window on Oct. 6, in the week after it almost collapsed, the data show. Wachovia agreed in principle to sell itself to Citigroup Inc. on Sept. 29, before announcing a definitive agreement to sell itself to Wells Fargo & Co. (WFC) on Oct. 3. The Wells Fargo deal closed at the end of 2008.
You know who else was on this story long before it broke? Alan Grayson, who was voted out of Congress in 2010. America, what can one expect when voters remove people from office who try to expose what's really going on and vote in people who want to destroy social security, safety nets per their uber-rich billionaire donor mandates?
In the below video clip Bloomberg hunts the Federal Reserve discount window loan documents on air for Goldman Sachs, who claimed they were just fine during 2008,....and find them:
It's astounding how this all is being swept under the rug. Three years later and we have one Senator calling for an investigation into Goldman Sachs for violating the law. To date, there have been no criminal charges and fines that are mere slaps on the wrist. While many ponder why no one has gone to jail, any real action, simply doesn't happen.
One has to give credit to Bloomberg news on this story, else even this much would have never been disclosed.
| Attachment | Size |
|---|---|
 fedfoiadiscountwindow2008.xls | 2.98 MB |
Comments
this story broke March 31st, 2011
Reporters, analysts are still reading the documents and I couldn't write an overview of what has been found until now. Some stories are timeless, and this is one of them.
Absolutely Sickening
Do we know anything about whether all of these loans have been paid back?
I see that this writeup has had over 1000 views. I don't understand why I am the first person to leave a comment, but I would suspect that there's a connection between the silence here and the passivity and lack of outrage over this in general.
One difference though is that people come here to read about economics and your readers would all be above-average consumers of news reports.
good question why not
it could be this story started to break, on the 31st, but because the amount of data is so massive, little pieces are coming to light over time.
It looks like they "paid it back" with glorified free money on fictional "profits". This the circle jerk financial situation I've been describing elsewhere.
Share the post, invite your friends, we sure need more outrage and chatter!
Momentum and folklore
The Fed has a whole lot of momentum going for it. Fed mass is huge. So the force to move it is similarly huge.
Nobody likes banks. Most liked banks are local banks, but nobody pays attention to the complicated hoaxes and scams whereby independent banks get swallowed up until it's too late.
For many many decades, the Fed was accepted as necessary because Congress could not be trusted with monetary policy. That was taught as doctrine at nearly every university. (It probably still is!) The idea that Congress can't be trusted with control over monetary policy still seems not unreasonable. On the other hand, it now appears that the central bankers also cannot be trusted with monetary policy. I think most people really understand that now.
Negative thinking never inspires positive program.
Nobody can imagine that there is any other way to do things. They either think that a central bank is necessary, or if they don't think that, then they think that the answer is the gold standard. For years now, you could never convince anyone that there was any reason to discuss balancing the federal budget, since "they can print as much money as they want." So nothing to talk about. It was all much ado about nothing. Is there gold still in Fort Knox? Nobody knows. Very few people understand money or monetary policy at all. They suspect money unless they can think that it is "backed up" by gold. Even a pretty good egg like Ron Paul seems to believe that "the gold standard" is some kind of panacea. Many people vaguely believe that there a grand central bank in Switzerland that controls everything - tied in with the Illuminati.
Probably a part of the problem is the idea that money - the medium of exchange - is intrinsically evil. Many people, if you discuss topics like the Fed with them, they will quickly tell you that what they would prefer to live in a system of barter, with no money involved. Otherwise, they seem to assume that OF COURSE THE FED IS EVIL, WHAT ELSE COULD YOU EXPECT?
Bottom line, as pointed out by Daniel Willingham in his book "Why Don't Students Like School?" - thinking requires effort and people avoid it whenever they can.
BUT DON'T GIVE UP HOPE - The Oregon State Bank bill has moved out of committee in the Oregon Senate where it was likely intended to die.
Oregonians for a State Bank
The Undiscovered Country
The public at large is not too interested for a couple of reasons. One is that they really don't have a clue what the Federal Reserve is. Perhaps the biggest swindle ever committed against the American people was to make them think a cabal of private bankers is actually a government agency.
And the subliminals are amazing and ingrained. I remember a few weeks ago a story on one of the networks, I believe about interest rates, and as the newscaster babbled on, the pictures in the background were of the Federal Reserve building. But not the whole building, instead it zoomed in on where the marble pillars met the roof.
Why?
What is this imagery saying? Well, it's saying that the Federal Reserve is a pillar. And that's what Americans have been duped into believing - that this cabal of private bankers, of bankers, by bankers and for bankers, whose real purpose is to shove hundreds of billions even trillions of dollars of the people's money into the pockets of bankers, and do so in a completely unaccountable and unchallenged way is really this rock solid government agency that protects our gold and looks out for the people's best interest.
It is the biggest swindle ever perpetrated on a people, and the largest transfer of wealth from the bottom to the top in world history.
Education on exactly what the Federal Reserve really is, and what it's doing to us is the Undiscovered Country for activists. 99% of the work on this remains to be done.
The Federal Reserve wants the people in the weeds arguing over the Democrat vs. Republican dog and pony show. So while that's going on they can continue to shove the people's money into the pockets of their friends.
And we're in this ludicrous position of constantly calling on the Federal Reserve to solve problems that the Federal Reserve caused. This mess, virtually in it's entirety was enabled by fractional reserve lending and 20 years of serial bubble blowing. The expansion of credit has enabled the elites to send half of the American manufacturing jobs overseas and make it appear as if this could be done without a loss to standard of living. This expansion of credit traces back in it's entirety to the Federal Reserve.
Someone once said, "Kill one person and it's a tragedy, kill a million and it's a statistic." Even the people who know what the Federal Reserve is doing are feeling dwarfed by it. It's so much money, the fraud and theft is so gigantic it's all feeling like just another statistic.
Every day, under our nose bankers take huge sums of the people's money virtually interest free from the Federal Reserve, then turn around and lend the people back their own money at 3% via treasuries bought through Goldman Sachs, stuffing their pockets with commissions along the way.
Now everybody blew a fuse in 2008 and insisted that from now on they want to know about ponzi schemes in real time. And yet out in the open right under everyone's nose the Federal Reserve sets up yet another ponzi scheme funneling billions hand over fist into banker's pockets and nobody does anything.
And it all coincidentally comes for us at a time when the man in the White House represents the culmination of all the hopes and dreams for 95% of the media, so they don't want to touch anything that makes him look bad.
We are in deep, deep trouble.
Pareto distribution
"And it all coincidentally comes for us at a time when the man in the White House represents the culmination of all the hopes and dreams for 95% of the media, so they don't want to touch anything that makes him look bad."
Yep. 95% of the media, which represents 5% of real people.
I disagree that 95% of the
I disagree that 95% of the media represent 5% of real people.
I believe the rank and file of the media do WANT to represent the real people, but they are employed by their management (masters) and management of media, i,e. media corporations are most likely incorporated offshore, if not in Delaware. My goal here is to draw your attention to the book: Treasure Islands by Nicholas Shaxon: (available on Amazon). These are the powerful corporations and individuals through which lobbying money flows to organizations, think tanks and politicians. If the money doesn't benefit them directly, it benefits their campaign war chests. It is estimated that 550 offshore entities comprise the major banks and hedge funds. Read about how they manipulate the world to evade taxation.
The REAL media (the reporters and editors) DO want Mr. Obama to prevail in the ideals of restoring justice and fairness, however, Mr. Obama, if he is not captured by his donors, is probably well aware that he and his family is disposable, one way or another. Small money and motivations = small thugs that go to jail. Big money and motivations = thugs with a lot more finesse and distance, able to paper things over and are global in reach. Too big to fail = to big to get caught.
So don't blame the media. They don't make the money you think they do. The average reporter probably makes no ore than $30-50k, unless you're in the big leagues or front a show of some sort. TREASURE ISLANDS by Nicholas Shaxon.
Standards for conclusions drawn from stats
Well, about the Pareto distribution, I did not expect that to be taken literally or as something that could survive analysis under any standard for conclusions drawn from stats. Probably, I should have noted that by going to the RTE and clicking on one of those funny little faces
About the media, that could be a long discussion. We'd have to get into such matters as the role of university education in the dumbing down, as noted by Noam Chomsky, and, media consolidation since World War II. There's also such items as the summary dismissal by TIME of the reporters who were forced to publish 'Six Seconds in Dallas' more-or-less at their own expense (having been fired for doing a great job on the JFK assassination).
And then I'd be called a 'conspiracy theorist', which is a tiresome thing.
And, after all, that kind of discussion is what we are all about not having here at the Economic Populist (at least, that's my view of it - and a big part of what I like at this website).
Let me just say that the best reporting we have in the U.S. has generally been financial reporting (excepting sports, I suppose, and science news). After that, I find it noteworthy that the best reporting I find on U.S. affairs is in publications based outside our borders -- in the U.K. or in Australia.
But that's just my 2¢
And, BTW, I hear that Huffington Post pays reporters and other contributors ABSOLUTELY NOTHING! (No criticism of Huffington Post intended - I consider it a relatively good source!)
As always, the "media" is an easy scapegoat
I disagree that 95% of the media represent 5% of real people.
I believe the rank and file of the media do WANT to represent the real people, but they are employed by their management (masters) and management of media, i,e. media corporations are most likely incorporated offshore, if not in Delaware. My goal here is to draw your attention to the book: Treasure Islands by Nicholas Shaxon: (available on Amazon). These are the powerful corporations and individuals through which lobbying money flows to organizations, think tanks and politicians. If the money doesn't benefit them directly, it benefits their campaign war chests. It is estimated that 550 offshore entities comprise the major banks and hedge funds. Read about how they manipulate the world to evade taxation.
The REAL media (the reporters and editors) DO want Mr. Obama to prevail in the ideals of restoring justice and fairness, however, Mr. Obama, if he is not captured by his donors, is probably well aware that he and his family is disposable, one way or another. Small money and motivations = small thugs that go to jail. Big money and motivations = thugs with a lot more finesse and distance, able to paper things over and are global in reach. Too big to fail = to big to get caught.
So don't blame the media. They don't make the money you think they do. The average reporter probably makes no ore than $30-50k, unless you're in the big leagues or front a show of some sort. TREASURE ISLANDS by Nicholas Shaxon.
MB, the "media" vs. real journalists + Treasure Island
Hi MB,
I agree with you on this, the journalists and almost always the rank and file are usually still running on ethics and trying to do an objective, good job and it is the people who "own" the media.
You're mentioning Treasure Island and I'm aware of this book. If you want to create an account on EP and then write up a solid review of Treasure Island, please do, I know our readers want to read this and we do book reviews.
We could use a solid review of it.
Rank and Fle versus Managing Editors
The problem may also be where the owners and the rank and file meet. Namely, at the office of the 'Managing Editor'. There is such a thing as censorship by omission. I think, if you can get someone off the record, you can ask anyone in the business. Not a matter of management in the ordinary sense, but U.S. mainstream media is obviously 'managed'. And, as our bête noire of U.S. academia, Noam Chomsky, has pointed out, lots of education at the 'right' schools is required because that way the managing editors know that they won't need even to write a memo to get the results they want to see.
As for the public, my opinion of the whole situation is pretty much that "everybody knows" although many do not want to be troubled with acknowledging what everybody knows. This is obvious from what is standard background plot for most movies and fiction books. I think that we are almost at a situation like existed in the U.S.S.R., where NO ONE (but no one!) took the media seriously at all respecting politics or in general. For much, if not most, of the U.S. public, mainstream news is a joke. Isn't making a joke out of it the most watched type of tv news?
I don't really know, since I don't even subscribe to cable or satellite service.
BTW: I'd love to see a review of the Treasure Island book that MB likes.
Well said
"And we're in this ludicrous position of constantly calling on the Federal Reserve to solve problems that the Federal Reserve caused." That about sums it up. The side show is not the real deal and we're mired in multiple side shows as we fritter our wealth away, our human wealth.
Michael Collins
Question on discount window
An intelligent young person of my acquaintance asks this:
"The discount window - is that like the returns and exchange counter?"
That's what we need. Take the Fed back and return it to the Congress. Let's exchange the Fed for something else. Like, you know, a later and better version. You don't like your cell phone? Exchange it for a better one. Don't like the WTO? Exchange it for a better one.
I think that the concept of exchanging one system for another could make sense to most people. I used to say that I was for eliminating the Fed. Now I am saying that I am for exchanging the Fed for something better.
The problem is that you can exchange one bank for another and it's all the same bank. Just like you can exchange the one political label for the other - and nothing gets any better.
I don't like my ETF's performance, so I'll trade it in on another. Well, that's okay, but it won't turn the market around, much less the economy.
on the "end the Fed", they are all evil doers motif
Firstly, not everybody working at the Fed is "evil" and in fact this site uses some pretty damn awesome economic analysis and graphing tools from them, so they have a warm fuzzy in my heart just for that. But they employ thousands of economic researchers and such, so it's not all bad here.
But here's the ultimate question, do you really, I mean REALLY, want the Fed to be under the control of Congress or the administration?
The reason I ask that is because our Congress and the administration is so damn corrupt, they might as well put the G.E. logo in neon lights over the White House and put a gigantic LCD revolving ad like what's in Times Square saying "Goldman Sachs" over the Senate. For that matter, why not call the House of Representatives Koch Brother's Hall and you can have a few areas labeled illegal alien's lounge area.
I mean seriously, it's so corrupt we have budget proposals that cannot add 1+1 and going onto talk shows and lying their heads off. I mean literally, rewriting history, trying to claim Bush created jobs and reduced deficits.
I get that we're in the frying pan, but isn't the current proposed solution the fire?
Congress had their chance, multiple times, to enact financial reform and what they did was basically keep the "status quo" and make TBTF ....bigger. Financial sector is now 60% of the economy and that is obscene.
I think it's way more important to get corporate and special interest money 100% out of our government and all lobbyists shipped off to Gitmo.
If we had real representation or a democracy, I hear ya brother, but handing the Fed directly to multinational corporations more than it is....
99% (or more) of Germans under Hitler were not evil either
Perhaps it's just a matter of semantics, maybe you meant "Do you really want the *functionality* of the Fed under the control of congress or the administration?"
Because there doesn't need to be a Federal Reserve at all. In fact, the Federal Reserve Act is unconstitutional.
Article 1 section 8 is not ambiguous, it's as clear as it gets when it says that congress shall have the power to coin money and regulate the value thereof. Congress, not a cabal of private bankers.
Certainly they can employ automated mechanisms that let the market set interest rates, but could be overridden in times of severe crisis by a 2/3 super majority.
As far as the warm fuzzies over all the numbers the Federal reserve produces, this (the Fed putting out all that material) is also intentional to reinforce the false notion that it is a government agency. We already have a Bureau of Labor Statistics, Vital Statistics, Commerce Department and umpteen other government agencies collecting statistics and preparing charts of every kind imaginable.
But if Ben Bernanke wants to head up a private for-profit chart-making group then let him have at it. But get that criminal out of tinkering with our lives. Because he's denying tens of millions of savers at the bottom and fixed income people any return on their savings so that interest rates can remain near zero and thereby allow the bankers to loot the store. Purposely destroying our dollar which amounts to a massive regressive tax on energy and food (then the little crook just leaves those out of the CPI). All to the benefit of the wealthiest members of our society and detriment to the very poorest.
He has loaded the Fed's balance sheets with a mountain of garbage purchases that are against the Fed's charter and very likely illegal. He has manipulated and distorted markets to where we have no semblance of market capitalism left. He is the biggest robber of the people in US and possibly world history. That little criminal belongs in jail.
From jail, let him make all the charts he wants.
I did not intend to echo the mime
I agree certainly that not everyone working at the Fed is evil. Nor everyone working at the World Bank is evil. And, if there is such a mime frequently encountered here and elsewhere, I did not at all intend to echo it.
As for the 'ultimate question' -- ah, yes, that is the dilemma, and I am well aware of it. The thing is, as pointed out by Anon, there is a Constitutional issue involved. Beyond that, the Constitutional approach is the right approach. I base this on my understanding of monetarism as expressed by Henry C. Simons back in the 1930s. I don't believe that we can hope to have a democracy without a government capable of a sane monetary policy based on stable and well-supported law.
Of course, to advocate for reforming the Fed (what I have called 'trading it in for a newer and better model'), that would, of course, have to be part of a program of much broader structural reforms of finance and politics. I am also aware that the country that is outstanding in the type of monetary policy that I advocate is none other than the PRC, which is hardly a model of democracy. So, not only do I have to embrace a dilemma, I find that I must embrace a starkly dissonant contradiction.
So, I am a kind of exceptionalist, meaning that this entire historical moment has to be viewed as "all exceptions" (to any sane rules). It looks like late stage empire, which may hang on for centuries. Who knows?
In any case, I do believe that the beginning for any course of necessary reform is for us to at least attempt to educate ourselves and others as to the Constitution and not only the faults of the Fed system but something of the possibility - even the inevitability - of alternatives rationally set forth.
We cannot avoid a negative criticism of the Fed, and we should not avoid also stating at least the possibility of a positive critique. Another point here: we need to put something forward besides the insane 'gold standard' critique of monetarism.
I agree that, if we, the working people of America, can manage anything in the way of reform, we have to start with serious reform of politics, even structural reform, before we can imagine proceeding on to financial or monetary reform. That seems to mean, with much else, enough of a majority forming around economic issues to make it possible to pass amendments to the U.S. Constitution.