For months, I have been illustrating that both our officials, our banksters, and central banks globally have not told us how big this economic crisis really is in scope and size. For nearly three years now they have resisted giving the critical information of who got how much of the bailouts, etc, citing it would weaken certain banks and investors and that would be disastrous to the economic recovery. $800 billion is the number bandied about. But as the months move forward and each little bit begins to surface you have to ask, so how big is “the nut”? Well try on about $10 Trillion and growing! Consider these facts.
Goldman Sachs Group Inc., which rebounded from the financial crisis to post record profit last year, was a regular borrower from two emergency Federal Reserve programs in 2008 and early 2009, new data show.
The firm borrowed from the Fed’s Term Securities Lending Facility most weeks from March 2008 through April 2009, data released by the Fed today show. Two units of the New York-based firm borrowed as much as $24.2 billion from the Fed’s Primary Dealer Credit Facility in the weeks after Lehman Brothers Holdings Inc.’s bankruptcy in September 2008.
Chief Executive Officer Lloyd Blankfein, 56, was quoted by Vanity Fair last year as saying the company might have survived the credit crisis without government help. The firm’s president, Gary Cohn, was more definitive, according to the magazine: “I think we would not have failed,” he was quoted as saying. “We had cash.”
Treasury Secretary Timothy Geithner, who was president of the Federal Reserve Bank of New York during 2008 and 2009, has disputed such an assessment.
“None of them would have survived,” without government help, Geithner said in an interview last December.
Goldman Sachs took a $100 million overnight loan from the Primary Dealer Credit Facility on March 18, 2008, the day after the facility was created in the wake of JPMorgan Chase & Co.’s rescue of Bear Stearns Cos. At the time, spokesman Michael DuVally said his firm was “testing” the facility and would use it “if doing so makes sense from an economic and funding diversification point of view.”
The firm didn’t borrow any more from the PDCF until Sept. 15, the day that Lehman Brothers filed the largest bankruptcy in U.S. history. On that day Goldman Sachs borrowed $2.5 billion at a 2.25 percent interest rate and furnished the Fed with $2.68 billion of collateral. The firm doubled the amount it borrowed to $5 billion on Sept. 19 and doubled it again to $10 billion on Sept. 22, when Goldman Sachs’s London subsidiary also took its first PDCF loan of $250 million.
At the peak, Goldman Sachs borrowed $24.2 billion on Oct. 15, which included $18 billion for the firm’s U.S. broker-dealer and $6.2 billion for the firm’s London division, the data show. The peak borrowing came two days after the U.S. Treasury Department assembled executives from nine of the country’s biggest financial firms and told them they’d be provided with capital injections from the government, with Goldman Sachs receiving $10 billion from the Troubled Asset Relief Program.
In its quarterly filings with the U.S. Securities and Exchange Commission, Goldman Sachs didn’t disclose that it borrowed from the PDCF.
The firm also borrowed from the Term Securities Lending Facility, which offered longer-term funding than the PDCF’s overnight loans. On March 28, 2008, Goldman Sachs borrowed $7 billion from the Fed’s TSLF in exchange for $8.42 billion of collateral that included $3.5 billion in agency-backed mortgage debt and $4.9 billion of non-agency backed mortgage debt. Before the loan was scheduled to mature on April 25, Goldman Sachs borrowed an additional $4 billion on April 11 and $223 million on April 18.
The two largest TSLF loans to Goldman Sachs were $7.5 billion on Dec. 4, 2008, and the same amount on Dec. 31, 2008, the data show. The firm also didn’t disclose its TSLF borrowing in its quarterly SEC filings, although it provided data on its borrowing to the U.S. Treasury.
When the loans from the PDCF and the TLSF are combined, the firm’s total borrowing from the Fed peaked at $35.39 billion on Oct. 21 and Oct. 22, 2008, the data show.
“In late 2008, many of the U.S. funding markets were clearly broken,” he said. “The Federal Reserve took essential steps to fix these markets and its actions were very successful.”
Goldman Sachs didn’t borrow as much as some of its rivals, while it borrowed more than others. Morgan Stanley, which was the second-biggest U.S. securities firm after Goldman Sachs before the two firms converted into banks in September 2008, borrowed as much as $100.5 billion at its peak on Sept. 29, 2008, the data show. That includes $61.3 billion of loans from the PDCF and $39.2 billion from the TSLF, the data show.
JPMorgan Chase & Co., the second-biggest U.S. bank by assets, borrowed $3 billion from the Primary Dealer Credit Facility on Sept. 15 and as much as $5 billion from the TSLF on Oct. 17, the data show.
“We did not need the liquidity or funding” on the day of Lehman’s bankruptcy, said Jennifer Zuccarelli, a JPMorgan spokeswoman. As Lehman’s collapse triggered broader financial turmoil, “we had been encouraged by our regulators to use their facilities when it was helpful to the marketplace and to remove any stigma,” she said.
Even as JPMorgan borrowed less from those two programs than Goldman Sachs or Morgan Stanley, it was borrowing from a different Fed program that neither Goldman Sachs nor Morgan Stanley tapped. JPMorgan Chase and its Chase Bank USA subsidiary borrowed from the Term Asset Facility, which was established in December 2007 to provide term loans to depositary institutions.
The Federal Reserve has lifted its veil of secrecy regarding special lending programs during the financial crisis, responding to a mandate from Congress by revealing the specifics of transactions with firms like Goldman Sachs and Citigroup.
Critics of the Federal Reserve are poring over the data, seeking red flags regarding potential improprieties. And Congress has asked its Government Accountability Office to sift through the numbers and offer its own analysis.
At the same time, it’s possible that the release of details will end up largely vindicating the Fed for the massive financial support that it gave the economy at a time of severe stress. The emergency loans, in the view of many finance experts, helped to avert a much deeper economic slump. And those loans have now been largely paid back without losses to the central bank.
The numbers are staggering, encompassing more than a dozen emergency programs set up starting in 2007 or 2008. In one program alone the Fed doled out nearly $9 trillion in funds to borrowers such as Morgan Stanley and Merrill Lynch, largely at interest rates below 1 percent. (This program involved overnight loans, so the amount of Fed credit outstanding at any single point in time was much smaller.)
Other programs, with longer-term loans also measured in the trillions of dollars.
The Fed actions were just part of a larger array of government bailouts for the financial industry, which were deeply unpopular with most Americans. Rescue programs run outside the Fed included insurance-style backstops for bank debts and the investments from the Treasury’s $700 billion TARP (Troubled Asset Relief Program).
The Federal Reserved released documents Wednesday identifying the recipients of $3.3 trillion in emergency aid provided at the height of the financial crisis.
“Two European megabanks — Deutsche Bank and Credit Suisse — were the largest beneficiaries of the Fed’s purchase of mortgage-backed securities,” The Huffington Post‘s Shahien Nasiripour reported.
More than $290 billion worth of mortgage securities were sold to Deutsche Bank, a German lender. Credit Suisse, a Swiss bank, got more than $287 billion in mortgage bonds.
“The mortgage purchase program has come under withering criticism by economists and financial experts who believe the Fed’s initiative has unnecessarily inflated the housing market, and prevented the cleansing that pretty much all experts believe is necessary for a full economic rebound,” Nasiripour wrote.
“In addition, the Fed disclosed details of ‘swap’ arrangements with foreign central banks,” the Associated Press reported. “These occurred when the Fed traded much-in-demand dollars for foreign currencies to try to ease credit. The foreign central banks, in turn, lent the dollars to banks in their countries that needed dollar funding. The Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan were involved in the exchanges.”
Banks weren’t the only recipients of Fed money. Corporations like Caterpillar, General Electric, Harley Davidson, McDonald’s, Verizon and Toyota also relied the programs.
In 2008, as commercial loans dried up, the Fed became the only source of loans for otherwise creditworthy corporate borrowers.
The data, which took months to compile and had previously been secret, was released Wednesday to comply with July’s Dodd-Frank law overhauling financial regulation.
“The information spans six loan programs as well as currency swaps with other central banks, purchases of mortgage-backed securities and the rescues of Bear Stearns Cos. and American International Group Inc,” Bloomberg noted.
“We see this not as the end of a process but really a significant step forward in opening the veil of secrecy that exists in one of the most powerful agencies in government,” Sen. Bernie Sanders (I-VT) told reporters on Nov. 17.
“The act requires the Fed, after a two-year delay, to identify firms that, following the law’s passage, borrow through its discount window and participate in its purchases or sales of assets such as mortgage-backed securities and Treasuries,” Bloomberg observed.
There is much more to come because even with the resistance from the FED to be transparent, the situation involving IMF and the ECB is not even as transparent as the Fed. Given the size of this bubble, if it bursts it will make the mortgage bubble look like a dot. I know…Iknow… Stop.. Please I can’t take anymore. The reality is where you are going to take, not IF you are going to take it.