Largest Banks Profited by Borrowing From Federal Reserve, Lending to Federal Gov
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Thread: Largest Banks Profited by Borrowing From Federal Reserve, Lending to Federal Gov

  1. #1
    XCR Guru Difranco's Avatar
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    Largest Banks Profited by Borrowing From Federal Reserve, Lending to Federal Gov

    A newly-released study from the Congressional Research Service bolsters claims that the nation's largest banks profited off the Federal Reserve's financial crisis-era programs by borrowing cash for next to nothing, then lending it back to the federal government at substantially higher rates.

    The report reinforces long-held beliefs that the banking system in essence engaged in taxpayer-financed arbitrage: They got money for free, then lent it back to Uncle Sam while collecting juicy returns. Left out of the equation are the millions of everyday borrowers, like households and small businesses, who were unable to secure loans needed to tide them over until the crisis ended.

    The Fed released records under pressure in December and March that showed the extent of its largesse. The CRS study shows for the first time how some of the most sophisticated financial firms could have taken the Fed's money and flipped easy profits simply by lending it back to another arm of the government.

    The report was requested by Sen. Bernie Sanders (I-Vt.), who likened the crisis-era emergency loans to "direct corporate welfare to big banks," in a statement. The cash likely was lent back to Uncle Sam in the form of Treasuries and other debt "instead of using the Fed loans to reinvest in the economy," Sanders added.

    In all, more than trillion was lent to financial institutions from the Fed, and terms were generous. Junk-rated securities were pledged as collateral for taxpayer-backed loans. The Fed did not provide conditions for how the money was to be used.
    http://www.huffingtonpost.com/2011/0..._n_853884.html
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  2. #2
    XCR Guru Sean K.'s Avatar
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    Re: Largest Banks Profited by Borrowing From Federal Reserve, Lending to Federal Gov

    Well, duh. :duh: (Not knocking the report or your post Difranco).....just surprised that since this has been reported several times, from several sources, and several months ago, that HuffPo is finally reporting what has been common knowledge for so many months now.

    The messed up part is, HuffPo is as left leaning as they come....and we now have plenty of left and right wing sources admitting TARP, Fed Policy, etc. have benefited the large banks at the expense of the taxpayer....yet we STILL can't get any prosecutions for the fraud and we have very little public outrage (mostly, IMO, b/c the public isn't paying any attention).

    Sean
    "Necessity is the plea for every infringement of human liberty. It is the argument of tyrants; the creed of slaves."-William Pitt the Younger

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    Marksman Loonster's Avatar
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    Re: Largest Banks Profited by Borrowing From Federal Reserve, Lending to Federal Gov

    What fraud?
    - The fed was loaning out money at a very low interest rate
    - The government was borrowing money at a higher interest rate
    - The banks were the middlemen that connected these parties together.

    Of the 3 trillion lent to the banks, how much did the banks loan the government?
    Why did the government need that money?
    Why didn't the government go directly to the fed?
    “If a tyrant is one man and his subjects are many, why do they consent to their own enslavement?"

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    XCR Guru Sean K.'s Avatar
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    Re: Largest Banks Profited by Borrowing From Federal Reserve, Lending to Federal Gov

    Quote Originally Posted by Loonster View Post
    What fraud?
    - The fed was loaning out money at a very low interest rate
    - The government was borrowing money at a higher interest rate
    - The banks were the middlemen that connected these parties together.

    Of the 3 trillion lent to the banks, how much did the banks loan the government?
    Why did the government need that money?
    Why didn't the government go directly to the fed?
    The fraud was what led to the bubble which collapsed (aka the sub prime lending market or MBS....mortgage backed securities) wherein large investment houses FRAUDULENTLY sold bundled and rebundled securities that were worthless, or "crap", "dog shit" etc. and then insured themselves against the credit defaults they new that the high risk loans would eventually exhibit.

    "Necessity is the plea for every infringement of human liberty. It is the argument of tyrants; the creed of slaves."-William Pitt the Younger

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