Fed gave $1.2 trillion to aristocracy of American finance

Originally posted at AMERICAblog.


Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

Bloomberg also has a dramatic chart which documents these findings. Keep in mind that this lending started in 2008 and continued into 2009.

Equally stunning to the extent to which “the aristocracy of American finance” got bailed out was the extent to which the aristocracies of non-American finance also got bailed out:

It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

Keep in mind while this money was shooting out of a fire hose from the Fed to giant international banks, nothing has been done on a remotely similar scale to help out working Americans. Marcy Wheeler has a good take away from this:

the money the Fed lent out to these highly leveraged risk takers could have paid off (much less merely guaranteed) the 6.5 million delinquent and foreclosed mortgages that are currently dragging down the American economy.But instead of offering money to homeowners who would have used it to stay in their homes and sustain their neighborhoods, the Fed instead loaned it to the banks that were leveraged to the hilt.

Additionally, the free money the Fed gave to big banks could have come with a strict requirement that they lend it right back out to Main Street. But it didn’t and the economy is still in the crapper three years later.

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