Federal reserve admits it doled out trillions of tax dollars to foreign banks

http://pubrecord.org/nation/8622/pentagon-papers-wall-street/

by Sandman • 16 years ago

41 25 16 years ago

ars2• 16 years ago

Even if you believe him - which I don't, it wasn't doled out, it was loaned - at apparently normal rates for the fed, and to large central banks (i.e. creditworthy). Near zero rates? Baloney. 0.25% interest is the normal market rate for such banks - but of course he doesn't actually say 0.25 he says "near zero".

12.3 trillion? What is this an Austin Powers movie?

There's around 10 trillion dollars of money in the entire US! (M2 and lower money supply.) And around 50 trillion in total assets.

bsk• 16 years ago

Some people like to go big ;-)

So you say an audit of the Federal Reserve is not necessary?

rms• 16 years ago

I'm concerned that an audit of the Fed could hasten the collapse of the USA.

ars2• 16 years ago

I said that? I think an audit is reasonable, but I don't have a very strong opinion on it.

I certainly don't think the fed is the "source of all ills".

xentronium• 16 years ago

Surprise: US national debt is > $13 trillion.

And no, most of it isn't packed briefcases of five-dollar notes.

And discount rate of 0.5% is not as normal, as one might think. Compare with China -- ~3%, or Russia -- 7.75%.

zoomzoom• 16 years ago

It is called a loan, but the loan is only as good as the ability to pay it back, which comes down to collateral. The fed took literally the worst possible garbage in exchange for these loans. They amount to a gift, in reality.

The 12.3 trillion number sounds absurd, but it is real. What the article neglects to mention is that about 9 trillion was very short term and double counting along with various other exceptions. Only about 3 trillion was actually a handout.

Still, the point of the article seems valid, in a way that your foux-amazement fails to challange. Bankers were given more money then we can imagine, because they held the Fed hostage.

dpatru3• 16 years ago

>Near zero rates? Baloney. 0.25% interest is the normal market rate for such banks - but of course he doesn't actually say 0.25 he says "near zero".

Note that it costs the Fed nothing to make these loans. The Fed simply creates the money. To the extent that this is electronic money, there are not even printing costs associated with this money. Viewed in this light, any interest at all is too much because the money is only free for the Fed. The citizens who are taxed to pay it back with interest must work for the money.

meatsock2• 16 years ago

the subtitle asks if the crimes at hand are too big to comprehend -- this seems like an ultimate challenge to the mind of a hacker. complexity? bring it on.

meatsock2• 16 years ago

OK, noone else likes complexity. my bad.

arethuza2• 16 years ago

Wasn't a lot of this to do with support for AIG which had been selling boat loads of CDSs to lots of non-US banks such as RBS?

jarin• 16 years ago

Sometimes I wonder if all of this government doom-and-gloom stuff seems to be popping up more lately because it's really happening and all of this government incompetence is just now being uncovered or if I'm just paying more attention to it lately.

Kind of like the guy who trained himself to find golf balls everywhere.

arethuza2• 16 years ago

It doesn't surprise me, lots of things were done in a bit of a panic in late 2008 and it's no surprise that every effort was made to keep the gory details out of sight for as long as possible.

JVerstry• 16 years ago

Delusion is a powerful defense mechanism against harsh reality. Love those posts !!!

haploid• 16 years ago

Right. Except the Federal Reserve has zero impact on tax or fiscal policy. These are not "tax dollars".

The means by which the Fed extracts wealth from US citizens is not by taxation, but by inflation, since they effectively control the monetary base on which the money supply rests.

Some would argue that inflation is worse than taxation, since it disproportionately affects the lower class who pay the leading inflation "tax" in higher food and energy prices.

But that's an argument for another day. The fact is that journalists habitually get it wrong when they refer to the Federal Reserve as using "tax dollars", which is a blatant lie.

Also, as ars pointed out, these are currency swaps and loans, not handouts.

jpadkins4• 16 years ago

loans and swaps on toxic assets are essentially handouts. The real market value was probably less than 10% of the collateral price.

A different way to show it was a handout: What if the Federal Reserve gave out loans to all Americans with underwater loans (against the purchased price of the house, not current market value)? Why did the Fed give out loans to the CDS and loan holders of those very same assets? Isn't the default risk the same?

dpatru3• 16 years ago

Government's promise to pay back its debt is a promise to tax its citizens to pay it back. So at least to the extent that the Fed finances the US government, the Fed "lends" money it creates but expects to be paid back in tax money (money the citizens have worked for.)

jpadkins4• 16 years ago

This could be a good opportunity for a new international credit and currency system. I think an open standard, private sector based currency has a better chance than the G20 agreeing on a new reserve currency (nobody wants to anoint the next US).

Only startup I know working on this is bitcoin, any other alternative currencies?

bretpiatt• 16 years ago

We have many "private sector currencies" right now. Most people don't keep their assets in cash. If I buy any hard asset it is a currency -- not as directly liquid as cash since we don't have laws in place requiring a store to take my fine art in exchange for groceries.

As far as online currency, Facebook has the best chance to establish this: http://www.facebook.com/credits/

JoachimSchipper2• 16 years ago

Now there is a nightmare scenario I hadn't considered yet.

jpadkins4• 16 years ago

Interesting. I thought it would come from the international B2B space, not consumer. Facebook credits is very interesting, thanks!

dpatru3• 16 years ago

Why should a group of banks in collusion with the government have the right to get very wealthy by creating money and forcing me to accept it and use it?

To get an idea of the wealth involved, consider that most homes are purchased with borrowed money. Over the course of thirty years, the interest payments on the loans are two to three times greater than the cost of the homes themselves. Now consider that it cost the banks almost nothing to make the loan. They literally created most of the money at the time of the loan.

Thomas Edison said: People who will not turn a shovel full of dirt on the project (Muscle Shoals Dam) nor contribute a pound of material, will collect more money from the United States than will the People who supply all the material and do all the work. This is the terrible thing about interest.

dantheman• 16 years ago

In a proper functioning freemarket, one without a central bank, interest is function of savings - delayed consumption, and thus those who earn it, those who loaned out funds, are deserving of their reward. That is the beauty of interest, it encourages people to work just a little bit harder and produce a little bit extra which allows for investment in the future.

jonknee• 16 years ago

It appears he's adding up all the overnight and very short term loans together to get his crazy high figures. If I borrow and repay a billion dollars ten times, I haven't risked $10b. Not to mention that these programs worked... The money that the Fed created and loaned has been returned. No tax dollars were lost and the inflationary risk has lapsed.

Federal reserve admits it doled out trillions of tax dollars to foreign banks

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