Monday, November 28, 2011

Secret Loans Reveal the Arrogant Aristocracy of U.S. Banks

by Ian Hoppe

$7.77 trillion.

That number is the (actual) amount loaned out by the Federal Reserve in secret during the 2007 to 2009 financial crisis, from which we are all still reeling. It finally came out in a Freedom of Information act and a lawsuit by Bloomberg LP.

Just to put this number in perspective, since we’ve all become desensitized to the ‘billions’ and ‘trillions’ that are tossed around like pennies these days, $7.77 trillion is more than half of the US GDP in 2010. That means that the Fed loaned out an amount equal to half of everything of value produced in or by the United states in an entire year. Try to maintain that context and consider the following:

As a result of these various bailouts and transactions numbering in the tens of thousands, the “Big 6” banks increased in size (^39% since 2006)*, increased the amount spent on lobbying congress (^33% since 2006)*, and have all but ceased lending to businesses and individuals since. They made money on the deal (an estimated $13 billion net)*, and are sitting on it. Except, of course, that money they are routing to congress and attorneys to keep transparency and regulations at bay.

When we were all worried about TARP funds and congressional bailouts in the mere billions and small trillions of dollars, this egregious lending was going on behind the scenes without our knowledge and without our representatives’ knowledge. How are we or our elected lawmakers supposed to make decisions with incomplete information? This is shameful.

The “Big 6” consist of; Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley,  and Wells Fargo. Given the depth of failure it seems obvious that these institutions are dangerously inept in their practices and completely incapable of managing risk. These bailouts extended by The Fed, came with no restrictions and even further corrupted the incentive to acquire and balance with safe assets.

The big bank bailouts were bad enough, but with huge amounts of money flowing behind the scenes in an effort to sustain the clearly defective and contaminated monetary syndicates and their position in our staggering little republic, one wonders if a true aristocracy has formed, backed by the full faith and credit of the US government.


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