Forgot your password?
typodupeerror
This discussion has been archived. No new comments can be posted.

Fed Audit's Initial Report Reveals Trillions in Secret Loans

Comments Filter:
  • by rcb1974 (654474) <richardballantyn ... m ['l.c' in gap]> on Thursday July 21, 2011 @04:29PM (#36838242) Homepage
    nuff said.
    • Re: (Score:3, Insightful)

      by Anonymous Coward

      Dennis Kucinich is the left-wing equivalent. Both Kucinich and Paul are vocal about the Fed and its parasitic relationship to national economies. It is for that reason that I know they can be trusted.

    • Re:Ron Paul 2012 (Score:4, Insightful)

      by Kenja (541830) on Thursday July 21, 2011 @04:34PM (#36838296)
      True, reverting to the gold standard would greatly excelerate our fall into third world nation status. But I just dont see why that's a desirable thing.
      • Re: (Score:3, Funny)

        by rubycodez (864176)
        We became a superpower while on the gold standard; your statement is absurd.
        • Re:Ron Paul 2012 (Score:5, Informative)

          by 2muchcoffeeman (573484) on Thursday July 21, 2011 @04:46PM (#36838472) Journal

          The gold standard is overrated. The longer a country stayed on the gold standard during the Great Depression, the longer it took that country to get out of the Great Depression.
           
          As this article [econbrowser.com] notes,

          ... 13 other countries besides the U.K. had decided to abandon their currencies' gold parity in 1931. Bernanke and James' data for the average growth rate of industrial production for these countries (plotted in the top panel above) was positive in every year from 1932 on. Countries that stayed on gold, by contrast, experienced an average output decline of 15% in 1932. The U.S. abandoned gold in 1933, after which its dramatic recovery immediately began. The same happened after Italy dropped the gold standard in 1934, and for Belgium when it went off in 1935. On the other hand, the three countries that stuck with gold through 1936 (France, Netherlands, and Poland) saw a 6% drop in industrial production in 1935, while the rest of the world was experiencing solid growth.

          A gold standard only works when everybody believes in the overall fiscal and monetary responsibility of the major world governments and the relative price of gold is fairly stable.

          Enough with the gold standard nonsense already.

          • Re:Ron Paul 2012 (Score:4, Informative)

            by rubycodez (864176) on Thursday July 21, 2011 @05:05PM (#36838744)
            no nonsense, U.S. went off the gold standard in 1973. The Depression had everything to do with self-referential paper pyramid scams, same as recession of now. Quit being a shill for the banking cartel parasites who have been draining our wealth.
            • Re:Ron Paul 2012 (Score:4, Insightful)

              by DragonWriter (970822) on Thursday July 21, 2011 @10:17PM (#36841994)

              no nonsense, U.S. went off the gold standard in 1973. The Depression had everything to do with self-referential paper pyramid scams, same as recession of now.

              In the real world, the U.S. went off the gold standard in 1933, and the while there is some debate among experts about how big a role the gold standard played in the Depression overall, it was undisputably a major factor in the bank run and bank collapses that were one of the early events of the depression, because these were directly triggered by waves of attempts to convert dollars to gold.

              Its true that much of the world, including the U.S., adopted a system that was something like a gold standard under the 1946 Bretton Woods agreement, but this wasn't what most people (including most current advocates of a "gold standard") define as a gold standard (particularly, it was a "U.S. dollar standard" with a notional peg to gold, but only certain specially privileged actors had the right to convert dollars to gold; most gold standard advocates advocate free convertibility.)

              Even the limited sort-of-gold-standard of Bretton Woods was showing major strains by the late 1950s, and was completely failed by the late 1960s (with major runs on gold, the US threatening to deny conversion of dollars to gold to certain countries, and the open market price of gold far above the notional peg price), and effectively killed any meaningful resemblance to a gold standard in 1971 when direct convertibility was suspended and then the dollar began a series of rapid adjustments in nominal gold value in an attempt to maintain the core of the Bretton Woods system, which was the peg of other currencies to the U.S. dollar.

              What actually happened in 1973 is that the world left the U.S. dollar standard, more than the U.S. leaving any meaningful gold standard.

              Quit being a shill for the banking cartel parasites who have been draining our wealth.

              How about if you quit being a shill for the gold investors would-be parasites that are looking for their chance to join the banking cartels in that draining. If you look at the history of economies under the gold standard, its not like banking cartels were any less parasitic. The push for a return to a gold standard largely comes from people who have staked out positions in gold hoping to benefit from the inevitable runs on gold that gold standards produce, and their dupes.

          • Re: (Score:3, Insightful)

            by DriedClexler (814907)

            Considering that "going off the gold standard" in that time period is just a roundabout way of saying, "stealing the gold people were entitled to as currency holders", I think you need to show a little more than (very temporarily) puffed up economic activity to show that it was a good idea.

            In most shitty economies, you can goose the economic numbers for a few years if you loot the rich and spend the proceeds on cool stuff. (See: History of every Banana Republic.) That doesn't somehow prove that looting th

          • Re:Ron Paul 2012 (Score:5, Informative)

            by roman_mir (125474) on Thursday July 21, 2011 @06:41PM (#36840220) Homepage Journal

            . 13 other countries besides the U.K. had decided to abandon their currencies' gold parity in 1931. Bernanke and James' data for the average growth rate of industrial production for these countries (plotted in the top panel above) was positive in every year from 1932 on. Countries that stayed on gold, by contrast, experienced an average output decline of 15% in 1932. The U.S. abandoned gold in 1933, after which its dramatic recovery immediately began. The same happened after Italy dropped the gold standard in 1934, and for Belgium when it went off in 1935. On the other hand, the three countries that stuck with gold through 1936 (France, Netherlands, and Poland) saw a 6% drop in industrial production in 1935, while the rest of the world was experiencing solid growth. - this entire paragraph is ridiculous.

            The US didn't begin a recovery in 1933 at all. US only recovered once the WWII ended, so the government stopped with the spending and the credit could be reallocated back into the private sector. 1929-1945 were the years of bail outs and stimulus. And when talking about 'output decline', yeah, that's their most important metric. For the government of-course, as when prices fall in a deflation, they collect less taxes and they owe money, so to a government this is a double hit - they collect less in taxes and they must repay debts in appreciating currency.

            Of-course they hate deflation, but deflation is great for the consumer. FDIC was created to fight an imaginary problem - only 2% of deposits were wiped out during the Depression, but the prices fell by a much bigger amount due to the deflationary pressure, which was a healthy unwinding of the bubble, that the US government has created in the twenties, when it was buying UK debt, to prop up UK pound, so they inflated a huge bubble in agriculture, prices needed to go down and they fought it tooth and nail by printing so much money, it was obscene by those times.

            The consumers who didn't have their deposits disappear, gained hugely from the increase in purchasing power, much more than 2%, as the prices for agricultural products were plummeting, and government was trying to keep the prices up then, just like it's trying to keep prices for houses and various companies (banks, GE, GM, etc.) up today.

            Real gold standard wouldn't have let US to get into the Great Depression in the first place, because the Fed wouldn't be able to print money. The current depression wouldn't have happened either.

        • by MiniMike (234881)

          We also became a superpower without the internet; bye now!

        • I thought we became a super power after the Europeans bombed the crap out of each other so that they were basically all 3rd world countries and then we rolled in and bombed them some more. Add to that what happened in the Pacific Theater and basically we came out way ahead since we could actually build stuff and produce food. We really weren't on the gold standard during or after WWII since an individual US citizen couldn't actually redeem their dollars for gold from the government, but only foreign govern
      • Re: (Score:2, Interesting)

        by rcb1974 (654474)
        What we need is a fiat monetary system (not the gold standard, which will just make the depression worse due to natural scarcity of gold) where the amount of currency in the system (and hence its value) is controlled by a computer. The computer simply raises the tax rate in order to "destroy" currency and prevent inflation, or issues new currency in order to prevent deflation. The computer could simply use an HONEST CPI value that is continously measured in order to decide whether or not to create or dest
        • Re:Ron Paul 2012 (Score:4, Insightful)

          by citylivin (1250770) on Thursday July 21, 2011 @06:34PM (#36840162)

          "where the amount of currency in the system (and hence its value) is controlled by a computer. The computer simply raises the tax rate in order to "destroy" currency and prevent inflation"

          Whenever someone proposes that something complicated or unmanageable by human standards should be controlled by a computer, I cannot help but read the whole sentence in Dr Strangelove's voice. Which of course makes it instantly hilarious.

          I think my brain does this because people still don't get the fact that computers are just as fallible as man. They are after all, programmed by us. Computer control is NOT the answer and any system which would rely on it in a "savior" like way, is not one that I would 'bank' on. (heh)

      • But Ron Paul does not advocate return to pure gold standard, he advocates allowing competing currencies, some backed by gold, other by silver, third by "trust in US Government", and letting people/markets decide which one do they prefer.

        And, as others have said, US was technically on the gold standard until 70s, this is how dollar became reserve currency of the world...

        Paul B.

    • Re:Ron Paul 2012 (Score:4, Informative)

      by Anonymous Coward on Thursday July 21, 2011 @04:38PM (#36838356)

      You do realize that it was Bernie Sanders, not Paul, who ordered this audit, right? You know, Sanders (S-VT), where "S" is the Socialist Party of Vermont?

    • But I am unsure how the the powers of the Executive Branch can force a change.
      1. He only gets to sign or veto bills written by other people.
      2. He has no control over the airwaves that would be saturated by very desperate people who want to keep things the same.
      3. He will want to get re-elected.

    • by h4rr4r (612664)

      Or maybe the guy who actually did this?
      You know Bernie Sanders, or as Paulites would refer to him "teh ebil Socialist."

      Ron Paul gets a lot of credit for doing a whole lot of nothing.

      • Re:Ron Paul 2012 (Score:5, Informative)

        by dkleinsc (563838) on Thursday July 21, 2011 @05:02PM (#36838694) Homepage

        Here's the deal on this: Ron Paul is one of the minority in Congress who actually believes what he's saying and isn't for sale. It's actually not unusual for him to ally himself with the likes of Bernie Sanders (S-VT) and Dennis Kucinich (D-OH), because he will come to the same conclusions they do for completely different reasons. For instance, Kucinich and Paul have worked together trying to stop the war in Libya. Dennis is against it for typical liberal peacenik reasons like thinking it immoral to bomb people who present no threat to the United States. Ron is against it because he thinks of big military spending as tax-and-spend big government.

        Now, Paul has been pushing "audit the Fed" from a conservative angle for years. Sanders, on the other hand, actually managed to get it into law. Kudos to both of them for making the right decision.

    • by vajrabum (688509)
      Fascinating that you didn't seem to notice that this came from Bernie Sanders who's the only self described democratic socialist in the national legislature. Unlike Ron Paul there's no indication at all that Bernie Sanders is a racist (http://www.realchange.org/ronpaul.htm).
      • Fascinating that you didn't seem to notice that this came from Bernie Sanders who's the only self described democratic socialist in the national legislature.

        Bernard Sanders is not the only self-described democratic socialist in the Congress; there are at least 69 others (since, including Sanders, there are 70 members of the Democratic Socialists of America in Congress, but there may be additional self-described "democratic socialists" who are not members of the DSA.)

    • Re:Ron Paul 2012 (Score:5, Insightful)

      by harlows_monkeys (106428) on Thursday July 21, 2011 @06:38PM (#36840202) Homepage

      Ron Paul follows the Austrian school of economics. They believe that mathematical models and statistics can't be used to analyze economics, and that you cannot conduct tests are experiments to determine the validity of economic theories. You just have to reason it out from first principles. It is basically a rejection of the idea that economics can be developed as a science or based on real world data.

      They are essentially the economic equivalent of creationists, rejecting science. A Ron Paul economy would be a disaster.

      Maybe he'd be better on non-economic issues. Oh wait--he's tried three times now to use an underhanded legislative trick (jurisdiction stripping) to make it so the Constitutional prohibition of establishment of religion would not apply to the states. Yeah, state sponsored religion--that's just what we need.

      How about education? He supports spending public money on vouchers for Christian schools, but voted against vouchers for DC schools. I guess he thinks public schools are good enough for Black kids.

      Votes no on pretty much anything designed to encourage development of clean energy or to reduce our dependency on oil.

      Do Ron Paul supporters ever actually look into his record? Nearly all of them I've seen on the net seem to support him because he agrees with one or two of their pet issues, and they have no idea of how terrible he is on so many things.

  • I wish I had a surprise face for this, but things like this just don't seem to surprise me anymore.

    They're almost expected?

  • by Guspaz (556486) on Thursday July 21, 2011 @04:39PM (#36838372)

    I don't see how the federal reserve could have given out 16 trillion in secret loans when that represents more than five times the total assets of the federal reserve... Am I missing something? The GAO's report never mentions this figure.

    • by Jeng (926980)

      As someone else mentioned the Federal Reserve does overnight loans for banks and that if they are not paid back that day then there is a new overnight loan the next day, and the next, and the next, etc. Which really makes the totals add up quick even if the amount borrowed was not much initially.

      And these are Loans, not gifts, they get paid back.

    • Search the GAO PDF for "trillion" and you'll find several instances.

      Look at the CitiGroup bailout, they were worth "Citigroup was the second largest banking organization in the United States, with total consolidated assets of approximately $2 trillion."

    • by i kan reed (749298) on Thursday July 21, 2011 @04:52PM (#36838550) Homepage Journal

      As a poster suggested above, these were overnight loans that were almost immediately repaid.

    • by MrQuacker (1938262) on Thursday July 21, 2011 @04:52PM (#36838564)

      Thats total, not at once. Lend out $100 Billion to someone on Monday night, they pay it back Tuesday morning, and borrow it again Tuesday night to pay back Wednesday morning. Do that for a week and you just lent out a Trillion.

  • This is well known (Score:5, Informative)

    by sgent (874402) on Thursday July 21, 2011 @04:40PM (#36838394)

    Its not some sort of secret, it has been disclosed by the Fed in their annual reports as required by law.

    FORTUNE -- The bailout of the financial system is roughly as popular as Wall Street bonuses, the federal budget deficit, or LeBron James in a Cleveland sports bar. You hear over and over that the bailout was a disaster, it cost taxpayers a fortune, we didn't really need it, it didn't work, it was a failure. It has become politically toxic, which inhibits reasoned public discussion about it.

    But you know what? The bailout, by the numbers, clearly did work. Not only did it forestall a worldwide financial meltdown, but a Fortune analysis shows that U.S. taxpayers are coming out ahead on it -- by at least $40 billion, and possibly by as much as $100 billion eventually. This is our count for the entire bailout, not just the 3% represented by the massively unpopular Troubled Asset Relief Program. Yes, that's right -- TARP is only about 3% of the bailout, even though it gets about 97% of the attention.

    http://finance.fortune.cnn.com/2011/07/08/surprise-the-big-bad-bailout-is-paying-off/ [cnn.com] Fortune Magazine Article

    • by rcb1974 (654474)
      When you claim that the bailout worked, do you factor into your conclusion that 2011 dollars are worth about 20% less than 2008 dollars, due to inflation? Oh, and don't believe the CPI values that the government comes up with -- those are manipulated lower so that the government doesn't have to increase Social Security payouts.
      • by geekoid (135745)

        Yes. The problem is many people don't understand.

        The bailouts work in that the US economy didn't completely collapse.
        People seem to thing the bailouts working means things won't get bad.
        They are bad, but not nearly as bad as they would of been otherwise. Look at what happened in Japan when this happened. Look at pretty much in country this type of collapse happened.

        I do wonder if letting it crash would have been better for us in the long run. Meaning better regulations and controls. But that's a different t

    • Per the Wikipedia entry [wikipedia.org], normal audits of the Fed leave significant gaps, gaps that were to some degree addressed by this more through audit.

    • by roman_mir (125474)

      Bail outs did not work because the same institutions that were bailed out are just as insolvent today, as they are now loaning from the Fed's discount window and making a spread by buying/holding T-Bills. Once the interest rate goes up, they fail, and real interest is going up, Fed won't be able to hold interest down as long as it's printing, and it will continue to print.

      Fed now cannot even technically be bankrupt, as a couple of months ago, the Fed changed the rules, that any liabilities it holds actually

  • by jfengel (409917) on Thursday July 21, 2011 @04:43PM (#36838436) Homepage Journal

    OK, so they loaned out a truly epic amount of money. A reasonable thing to do during a crisis: you borrow money to get through the bad times, then you pay it back when times are better.

    The questions are:

    * Did they pay it back?
    * Did they pay interest?
    * How much?

    I don't really care about the absolute dollar figure: this was an international crisis and the dollar figures are going to be proportional to the size of economies, which will measure in the trillions. As long as the net result was that the economy survived (which it did), that it didn't blow up inflation rates (which it didn't; inflation was negative for a while), and that in the end the books balance (thus my questions).

    It may well be that the interest rates were so low as to be questionable, especially given that the banks have been giving nonexistent interest to depositors and have been very chary about turning that money around to investment. But I'm not going to wring my hands over the size of it. I'm more concerned about the terms.

  • I Betcha' that's just the tip of the iceberg.

  • by Grizzley9 (1407005) on Thursday July 21, 2011 @04:45PM (#36838460)
    I thought this site explains what a trillion dollars is fairly well.

    www.wtfnoway.com [wtfnoway.com]
  • The Fed and the Treasury keep swearing that they're not going to monetize the debt. But my goodness, this amount of money is greater than what we owe [wikipedia.org]. For that matter, it's greater than our GDP [wikipedia.org]. This is why we should all laugh when they say they won't be monetizing the debt, try to prepare for heavy inflation, and vote for someone who has a record of not being a mere R or D. The Fed supplied status quo, built on endless wars and unsustainable entitlement programs, will end because it will destroy our curren
    • Incorrect (Score:4, Informative)

      by geekoid (135745) <dadinportland@ya[ ].com ['hoo' in gap]> on Thursday July 21, 2011 @04:52PM (#36838566) Homepage Journal

      Lets say I have 5 dollars.

      I lend you 5 dollars, the next day you pay me back 5 dollars and 5 cents.
      The I lend that 5 dollars to someone else and they paid me backs 5 dollars an 5 cents.

      I lent out 10 dollars during those 2 days, but I never lent more then I had. And I ended with 10 cent more then I started.

      Get it?

      Listening to most slashdotters talk about finance is like listening to accounts talk about a computer. simple painful.

  • ok (Score:5, Informative)

    by geekoid (135745) <dadinportland@ya[ ].com ['hoo' in gap]> on Thursday July 21, 2011 @04:50PM (#36838526) Homepage Journal

    A) These are loans, almost all of which get paid back.
    B) this is not a secret. Just because something goes on you didn't know about, doesn't mean it was a secret. It just means you where ignorant.
    C) This benefits the US. The US MADE money from this.

    I just had to get that out there, I know it wont stop the frothing lunatics.

    • by Tr3vin (1220548)
      But... But... Ron Paul says...
    • Re: (Score:3, Informative)

      by roman_mir (125474)

      US lost money on this and it will lose money going forward on these very bail outs again.

      1. Moral hazard was created - now everybody knows they will be bailed out again. Everybody can gamble, government made sure of it. You loan money to these major banks, you can't lose. The government won't let you. All managers at the banks know, they can take any crazy risks, the government will bail them out.

      2. The bail outs are causing massive price hikes, the money printing is inflation and inflation causes prices

      • by inKubus (199753)

        The so called repayment is no such thing. Let the Fed show the actual money, because the moment they try to sell the assets that they own from those banks they will find out their actual worth, and it's nowhere near what they tell you, there is no repayment.

        Uh, the Fed prints money. They can show whatever they want. The Fed responded to a massive deleveraging (leveraging is when money is spent multiple times). In the U.S. economy, we rely on money being spent around 8 times at once. It's hard to envision

  • by panda (10044) on Thursday July 21, 2011 @04:51PM (#36838538) Homepage Journal

    "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.

    Since when is the Federal Reserve an agency of the United States government? Last time that I checked it was and still is a privately owned corporation.

    • by mybecq (131456) on Thursday July 21, 2011 @05:54PM (#36839538)

      Since when is the Federal Reserve an agency of the United States government?

      Since [federalreserve.gov] December 23, 1913 [federalreserve.gov]:

      The Federal Reserve, like many other central banks, is an independent government agency

    • Act of congress (Score:4, Informative)

      by sjbe (173966) on Thursday July 21, 2011 @06:02PM (#36839676)

      Since when is the Federal Reserve an agency of the United States government?

      I would guess ever since the Federal Reserve System was created by an act of Congress [wikipedia.org], which has been amended some 200 times. All banks are required to be members of the Federal Reserve.

      Last time that I checked it was and still is a privately owned corporation.

      It is technically private but that doesn't mean it doesn't answer to the government. The Fed needs some independence to do its job properly. But the Fed is a quasi-governmental entity. It is backed up by the full faith and credit of the US government and only exists because Congress delegated some powers to it. It is private in the same sense that Fannie Mae was private. Technically true but well understood that it had the backing of the government.

    • by Lando (9348)

      Federal reserve is a part of the government. I believe it's a common misconception that it isn't a part of the government because it's an independent agency and word of mouth isn't that hot about specifics. I had the understanding that it wasn't a part of the government until I took an economics class where the instructor mentioned that it was and I did a little digging.

      http://en.wikipedia.org/wiki/Federal_Reserve_System [wikipedia.org]

  • by gubers33 (1302099) on Thursday July 21, 2011 @04:51PM (#36838546)
    No one from any banks or investment firms should be allowed to serve on any government boards. The corruption is absolutely absurd, they have the interests of the companies they are boards on not of the people. Like what this country was founded on a government of the people, by the people and for the people. But this country has become ruled by the corporations and it just saddening.
  • by Thelasko (1196535) on Thursday July 21, 2011 @05:17PM (#36838940) Journal
  • by Chas (5144) on Thursday July 21, 2011 @05:37PM (#36839244) Homepage Journal

    1: Stop with all the NEW pork projects in the government and military.

    2: Finish out any projects already on the books that are within their original budgets.

    3: Do not continue to pay for projects that are overdue.

    4: If projects are overdue, DEMAND DELIVERY.

    5: If the contractor cannot deliver, declare the project failed and in default.

    6: Liquidate the company's assets to recoup the cost of the failed project.

    7: Stop all the government welfare crap. If there's legitimate medical reason, maybe. I'm a big fan of government-created work programs though. Nothing like a lot of back-breaking labor to motivate someone to get a real job. Tie it into health and housing support with a small budget for food, etc.

    8: When an official is elected to office, liquidate all his assets and put them into a fund tied to the well-being of the economy. This way, if the economy does well, he has a lot of money when he leaves office. If the economy tanks, he's handed a set of clothes and turned out on the street when things are over. Tax rates would be fixed during their term and only take effect once their successor took office. This way they can't fix tax rates to generate false profit.

    I could go on, but you get the idea.

    Of course, this would never work. Politicians of all stripes would never actually DO this. The lousy fucking bastards are all more worried about keeping their jobs and lining their pockets than they are about actually doing something to help the country.

    Maybe they should wor

    • Better idea: guarantee a basic income to everyone, and encourage innovation through challenges (biz can hold them too). The focus should be on the advance of knowledge and technology, because that is what raises standard of living and increases the survival fitness of society. Debt is a giant distraction, purely a way for attention-seeking bankers to seize control of the national discourse to gratify their egos.

  • by tekrat (242117) on Thursday July 21, 2011 @05:48PM (#36839436) Homepage Journal

    Now if only they could find that 12 Billion that went missing in Iraq. Yeah, whatever happened to *that* ?

  • by m.dillon (147925) on Thursday July 21, 2011 @06:43PM (#36840240) Homepage

    But I guess it isn't so :-(

    This isn't really news. These weren't even real loans, they were just 28-day backstops during the money market meltdown. Just like the inflated values reporters loved to throw around about CDSs, it's more of the same here. They're just adding them all together sequentially (and conveniently forgetting to report the short durations and senior debt status).

    And, really, only a complete fool hopes and prays for the banking system to fail.

    Go looking somewhere else, this was one thing the Fed actually did right. And like TARP, the government didn't lose any money doing it either.

    If you want to complain about something complain about the use of the AIG bailout as an indirect method of bailing out the (mostly bank) counterparties. That was real money that didn't have to be paid back to the government.

    -Matt

  • by rockwood (141675) on Thursday July 21, 2011 @07:27PM (#36840714) Homepage Journal
  • How is this news (Score:3, Interesting)

    by MonkeySpaceCapsule (1314937) on Friday July 22, 2011 @08:55AM (#36844540)

    I'm not sure why this is news (google "short term loans federal bailout" for stuff back in march/april). The Fed Reserve admitted to as much months back, though it had to be coerced out of them. The loans (overseas and domestic) were done in an overnight or sub-week fashion in order to provide liquidity in the open market. Where I draw issue is that most of these banks had capital, but were unwilling to lend it. Instead, they were able to get essentially free (~0% interest) money with which they could purchase short-term positions with guaranteed returns (e.g., US Treasuries) and make considerable money. Almost *none* of this money was lent to small businesses (as that would've required a long-term loan from the Fed, which this was not).

    During that interval I really wished I would've qualified as a bank so I could (1) get huge sums of zero-interest short term money from the Fed and (2) just stash it somewhere to get returns in gov't bills.

    Also, the metric reported (16 trillion) is a bit skewed. If you imagine that this was done over 14 months and the loans were of a 2.5 day average, that means any given day only 95 billion dollars was actually wrapped up in loans ( e.g., the RMS loan value is $9.5e10= $16e12/(14 months*30days/month)*2.5days). However, taking that back-of-the-envelope number and calculating interest, that let (with 3% compound interest at 14 months), the collective of banks make ~3.6 billion in returns. So, given the loss to the community (e.g., free money of 3.6 billion to rich banks), versus the potential fallout if they hadn't made these loans (e.g., bank collapse??), I say that this was a *very* cost effective means of stabilizing the economy. This is in contrast to other "bailouts" and shovel-ready plans which essentially just funneled cash into poorly managed state slush funds and pet projects.

     

He who is content with his lot probably has a lot.

Working...