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...because the Federal Reserve offered the real bailout. TARP's few hundred billion would be worth far less had the Fed not printed trillions, and used it to bu

• marze 12y ago
  Doesn't the purchase of the bank's junky assets at above-market valuations go by the name "quantitative easing"? Is that what you are referring to?
  • vitobcn 12y ago
    Probably, he's referring to this official GAO (Government Accountability Office) audit report [1] from 2011, which exposed the Fed secretly loaned 16 trillion USD (!!!) to big banks worldwide at 0% rates (afaik, currently fully unreturned). Here are the top four [2]: Citigroup - 2.5 T$ Morgan Stanley - 2.0 T$ Merrill Lynch - 1.9 T$ BOA - 1.3 T$ Frankly, I'm surprised this didn't receive more attention from the media. [1]: http://www.gao.gov/new.items/d11696.pdf http://www.gao.gov/new.items/d11696.pdf (Table 8, PDF page 144) [2]: http://www.sott.net/article/250592-Audit-of-the-Federal-Reserve-Reveals-16-Trillion-in-Secret-Bailouts http://www.sott.net/article/250592-Audit-of-the-Federal-Rese...
    • maxerickson 12y ago
      The numbers in those tables are an example of scary addition. Quoting from the text describing the table: For example, an overnight PDCF loan of $10 billion that was renewed daily at the same level for 30 business days would result in an aggregate amount borrowed of $300 billion although the institution, in effect, borrowed only $10 billion over 30 days. In contrast, a TAF loan of $10 billion extended over a 1-month period would appear as $10 billion. As a result, the total transaction amounts shown in table 8 for PDCF are not directly comparable to the total transaction amounts shown for TAF and other programs that made loans for periods longer than overnight. Your fully unreturned is incorrect, many of the loans used to create those totals were payed back the very next day after they were made. A more interesting analysis would show a plot of the outstanding loan balance each institution maintained over time.
      • adventured 12y ago
        Can you provide the information showing that Citi paid back the $2 trillion? I've found it difficult to locate such.
        • maxerickson 12y ago
          It's implicit in the information. Also, the PDCF is closed: http://en.wikipedia.org/wiki/Primary_Dealer_Credit_Facility http://en.wikipedia.org/wiki/Primary_Dealer_Credit_Facility
        • maxerickson 12y ago
          For posterity, this page also says about the Primary Dealer Credit Facility (which is where the trillions come from in the GAO report): All loans extended under this facility were repaid in full, with interest, in accordance with the terms of the facility. http://www.federalreserve.gov/newsevents/reform_pdcf.htm http://www.federalreserve.gov/newsevents/reform_pdcf.htm
• Animats 12y ago
  Right. It's those low, low interest rates, and that banks are allowed to mark them up. If those low interest rates were only available, say, for FHA and VA loans, which bypass the banking system's markup, or for infrastructure projects, the effects would be different. A lot of unnecessary M&A activity is powered by cheap loans. On the other hand, if conservative investments were returning a decent return, the VC industry wouldn't be awash with cash.