Fed Gave Banks $80 Billion in Secret Loans…At Rates As Low As 0.01% Interest
- Posted on May 26, 2011 at 8:44am by
Jonathon M. Seidl
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In April, Bloomberg News revealed that foreign banks were the biggest recipients of the Fed’s discount loan program during the height of the financial crisis. And if foreign banks getting emergency cash wasn’t bad enough, Bloomberg has uncovered another absurdity from the recession-era financial markets: it’s now estimated that the Fed dolled out $80 billion in secretive loans to banks, and some locked in interest rates as low as 0.01 percent.
The loan program is called single-tranche open- market operations, or ST OMO. Bloomberg explains what went down:
The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.
Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.
Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. told Bloomberg it’s obvious what happened.
“This was a pure subsidy,” he said. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”
According to Bloomberg, details of the program “weren’t revealed to shareholders, members of Congress or the public.” And it also found that the Dodd-Frank financial overhaul overlooked the program entirely:
Congress overlooked ST OMO when lawmakers required the central bank to publish its emergency lending data last year under the Dodd-Frank law.
“I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.
Records of the 2008 lending, released in March under court orders, show how the central bank adapted an existing tool for adjusting the U.S. money supply into an emergency source of cash. Zurich-based Credit Suisse borrowed as much as $45 billion, according to bar graphs that appear on 27 of 29,000 pages the central bank provided to media organizations that sued the Fed Board of Governors for public disclosure.
The Fed defends the loans by toeing the government line, mainly claiming that the money given to banks kept the banks above water and secured cash flow for regular Americans.
Jeffrey V. Smith, a spokesman for the New York Fed told Bloomberg that “this program helped alleviate strains in financial markets and support the flow of credit to U.S. households and businesses.”
But John H. Cochrane, a finance professor at the University of Chicago Booth School of Business, says the program was beyond the Fed’s reach.
“The Fed was slamming the pedal to the metal in the lender-of-last-resort category,” he told Bloomberg. “What they did was so far from what we conventionally think of as monetary policy.”
Read the full article from Bloomberg News.
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Comments (119)
loveliberty83
Posted on May 26, 2011 at 9:46amyes 7 they want to blame medicarer etirement with ss
Report Post »saviorammo
Posted on May 26, 2011 at 9:45amI have known about this for years. How could Barney and the rest not? They couldn’t. They are all guilty of crimes against the people.
They all should be interrogated, along with the Fed.. And I mean have the screws put to them, live ont t.v and in the public domain.
Then go retrieve stolen monies from wherever it has gone. Take everything those involvde own and put them to death and their money towards the deficit.
Our entire government is rotten to the core. There can be no more excuses. Arrest these criminals before it is too late. You can do this on the State and local level as American citizens.
Report Post »MADASHELLONE
Posted on May 26, 2011 at 9:40amAll I have to say about this complete failure is that there is ONLY 360 million people in this country and the fed keeps on giving billions of dollars to these sorry banks so that it would stimulate the economy well it has not and will not work.. So hear is a novel idea give a million dollars to every AMERICAN in this country and we will stimulate the economy ourselves seeing how it is OUR tax money that the fed keeps giving away on our behalf. This program would save BILLIONS of tax payer money and just maybe this country that every American loves will become great again.
Report Post »annieoakley
Posted on May 26, 2011 at 9:39amThe Fed Reserve began in 1913 so it is OBVIOUSLY George Bush’s fault.
Report Post »bandi9
Posted on May 26, 2011 at 9:39amWhat they need to do is whichever Republican is elected president, name Ron Paul as Secy of Treasury, then watch the lemmings at Fed Reserve scurry for the cliffs. Its becoming such that nobody in the public sector is to be believed anymore. That is very sad and a very slippery slope.
Report Post »cous1933
Posted on May 26, 2011 at 9:59amHow about we just vote for Ron Paul for President?
Report Post »LadyIzShy
Posted on May 26, 2011 at 9:29amhow can the government loan money it doesnt have?????????
Report Post »NoMoreKoolAid
Posted on May 26, 2011 at 9:29amSo. The Fed loans (taxpayer) $$ to the banks during the crisis for pennies. The Fed loans money to the US to pay its debt too.
Did it give the taxpayers this deal by giving the US government this deal?
And we wonder why the banks posted such high profits the first quarter after the market crash and every quarter since then…now we know.
Banks took the money, made a fortune, then paid back the American people mere pennies in interest and now just don’t want to talk about it.
Meanwhile… down on the ranch, we the people can’t get refiancing for our upside down homes and have lost them in droves. Our Small Businesses can’t get any capital. Just. Freaking. Great.
If we are to break it down into easy to understand terms, the true meaning of the establishment of the fed is simply to say that the government and its people no longer have control of their own money. The bankers seized control, and the government had to borrow money from the bankers for anything they needed, then turn right around and pay back that money, with interest, to finance itself…and the best part is that the bankers get to name the interest rate! Sweet! Great work if you can get it!
Are the collective American People not TOO BIG TOO FAIL? The FED has to GO!
Report Post »matt708
Posted on May 26, 2011 at 9:23amwhover was in charge needs to be fired, now
Report Post »geonj
Posted on May 26, 2011 at 9:21amthe fed should be prosecuted under rico statutes. it is a corupt organization in colusion with the likes of barney franks and other members of congress, along with the administration’s financial advisors. people like jeffery immelt.
Report Post »OH, I Get It!
Posted on May 26, 2011 at 9:20amSure, Congress has oversight of the Fed.
Report Post »Congress: We want to audit you.
Fed: NO.
Congress: We have oversight power over you.
Fed: Go pound sand.
Congress: We can subpoena you.
Fed: Go ahead, we won’t show up.
Congress: Please.
Fed: NO!
Congress: Pretty please.
Fed: Put your lips where the sun don’t shine.
SamIamTwo
Posted on May 26, 2011 at 9:19amIt is called transparency…the federal reserve needs to be investigated. Their books need to be reviewed…people have been asking for the review for many many years…isn’t the fed reserve under the treasury department as dictated by Obama? I think so…then they are gov’t employees if you ask me…same as freddie and fanny may.
Meh, it’s prob too late.
Report Post »exliberalgrl
Posted on May 26, 2011 at 9:04amEnd the Fed!!!!!!!!!
Report Post »lketchum
Posted on May 26, 2011 at 9:03amThink this is bad…. ask him about the 120 billion passed through AIG to foreign banks?!?!?
Now that one will make your blood boil and I think that 120 billion was actually much closer to 300 billion, and I by God intend to prove it.
Report Post »NOBALONEY
Posted on May 26, 2011 at 9:01amQuantative easing at its best.
Report Post »Stfwud
Posted on May 26, 2011 at 9:00amhttp://www.youtube.com/watch?v=l7uCHIbg064
Report Post »nacilbuper
Posted on May 26, 2011 at 1:01pmBest 30 Mins I have spent in a long time. Thank you.
Report Post »POdVet
Posted on May 26, 2011 at 9:00amDon’t worry, the money isn’t gone. We will see it again in the form of prepaid credit card anonymous donations to the Obama campaign next year!
Report Post »JQPublic
Posted on May 26, 2011 at 12:05pmYou can bet on that
Report Post »Slayer
Posted on May 26, 2011 at 8:59amAnd here come the Leftists to tell us that it was the right thing to do, Obama is for the little guy, Obama saved us from the Depression, Obama isn’t beholden to Big Banking or Big Corporate and the economy is actually improving!
Report Post »All lies.
Gonzo
Posted on May 26, 2011 at 9:12am“ST OMO, made 28-day loans from March through December 2008″
Report Post »That was Bush.
Slayer
Posted on May 26, 2011 at 10:05amGonzo, I knew one of you would come running to point out that it was Bush instead of Obama. So, do explain the last three years of making more loans and keeping it quiet. Thanks for falling into my trap.
Report Post »Gonzo
Posted on May 26, 2011 at 11:31amHey slayer, don’t look to me for a defense for Obama. There is none.
Report Post »13th Imam
Posted on May 26, 2011 at 8:58amMr Smith.
Report Post »Why would money , given to Foreign Banks, help secure cash flow for regular Americans. Regular Americans are the people that have to foot these .01% funds to begin with. American((Actual Taxpayers) households are taxed to oblivion already
Gonzo
Posted on May 26, 2011 at 8:57am“You’re doing a heck of a job” Ben.
Report Post »Sarcasm: –noun
1. harsh or bitter derision or irony.
2. a sharply ironical taunt; sneering or cutting remark
Jenny Lind
Posted on May 26, 2011 at 8:57amCut off all of it. This is an insult to every American that is struggeling to make their mortgage, buy food and gas and pay for their utilities. I am so totally outraged, I’m seeing red. O.K you who want to be our next president, what do you say, I will not vote for anyone who won’t address this, and how will you stop it? Enough, I am ready to go downtown and march ’till my feet fall off about this! Shame, shame, shame on the sneeky bastards that are doing this to us!
Report Post »We Are Not Alone
Posted on May 26, 2011 at 9:10amJenny, I’m with you…. they throw around millions and billions as though it’s a nickle or a dime…. I keep hearing. ‘oh we just pledged a billion here, a billion there, the US pledges a million here and there…. none of which is in the USA…. I can’t stand it… STOP IT!!!!!!
Report Post »TMACK
Posted on May 26, 2011 at 9:13amI agree 100% with you! It infuriates me that these “loans” are getting paid back by hardworking AMERICANS. We are being raped by high interest rates so the fat cats in the banking institutions can rake in the dough.
I’m so glad this Hope and Change adminstration is doing something about this (sarcasm).
Report Post »Sinista MACE
Posted on May 26, 2011 at 8:57amThis was a GIVEAWAY.
Anytime they lend your money to a foreign bank at that low interest, they’re robbing us and GIVING our money away.
Treason.
Sabotage.
Indict.
Arrest.
Execute.
Report Post »NSDQ
Posted on May 26, 2011 at 8:54amSo? Not like anybody is going to hold them accountable for breaking the law
Report Post »Sinista MACE
Posted on May 26, 2011 at 9:11amRon Paul tries, the neocons and liberals block him everytime.
Report Post »JQPublic
Posted on May 26, 2011 at 9:29amSounds like it’s time for another press conference from Ben Bernanke. We’ll get to the bottom of this then :-)
Report Post »flsnipe
Posted on May 26, 2011 at 8:51amSpreading the wealth just to make it more fair Joe.
Report Post »UFB!
nacilbuper
Posted on May 26, 2011 at 8:51amI heard on the radio that Citi borrowed 45 billion of our money (us the American People) at near zero percent interest. Then the Government (us the American People) borrowed that money back at 4.5% allowing Citi to make the spread or money on that loan. Huh?
I also heard that the government (us the American People) bought the bad loans citi had at 100% so they lost nothing.
Hear for yourself: Start to listen at 6:30
http://www.philsgang.com/media/RadioShow/Thu/RadioShow20101209.mp3
Report Post »Snowleopard {gallery of cat folks}
Posted on May 26, 2011 at 8:55amThanks for the link; and all I can say is that there are more thieves and rogues within the admin and its cronies who are stealing everything blind from us, while we are allowing it to happen. This admin is just going to allow it to occur so their own agenda can continue until the whole system collapses into their net.
Report Post »Slayer
Posted on May 26, 2011 at 9:00amWhat you’re NOT hearing much about is how Timmy Geithner just raided the Public Pension fund in order to stave off hitting the debt ceiling for another three months. But you will hear a lot of stories about American Idol and Dancing With the Stars.
Report Post »NOTAMUSHROOM
Posted on May 26, 2011 at 8:49amThere they go again. Screwing the American taxpayers.
Report Post »Snowleopard {gallery of cat folks}
Posted on May 26, 2011 at 8:53amTrue, so the transfer of the wealth from America to the rest of the world continues; I have to wonder just for how many years or decades even this has been going on with the Fed’s and when can we stop it once and for all? Or is it long past the point of no return with the national bank of the Fed’s?
Report Post »TexasCommonSense
Posted on May 26, 2011 at 8:54amI still want to know who actually owns the Federal Reserve.
Report Post »NOTAMUSHROOM
Posted on May 26, 2011 at 9:05am@Snow
Report Post »Probably all our lives. I’m not old enough to retire but I am officially on strike. I will not be contributing to this situation any more by working my butt off just to have more than my profit margin confiscated in “taxes”. You know, that “voluntary contribution” that Congresspeople, like that idiot Reid, think is there for their redistributionist wet dreams.
IMPEACHBHO
Posted on May 26, 2011 at 9:06amFed Res. started in 1913 and is independent from the executive branch, BUT its authority is subject to congressional oversight. So CONGRESS can and should slap the Fed Res. & Bernanke down hard. Bernanke has devalued our dollar (with BHO’s blessing) to the tune of almost 1 trillion dollars. (This is the real reason gas prices have gone up – a self admitted goal of BHO’s)
Report Post »Cobra Blue
Posted on May 26, 2011 at 9:06amTexasCommonSense
We all want a lot of things WE THE PEOPLE will never get. Its over…
Report Post »REAL
Posted on May 26, 2011 at 9:15am@Cobra Blue
We all want a lot of things WE THE PEOPLE will never get. Its over…
NOT WITHOUT A FIGHT!
Report Post »Cobra Blue
Posted on May 26, 2011 at 9:25amReal
Not without a fight….
Absolutely….and Amen to that.
Report Post »cous1933
Posted on May 26, 2011 at 9:33amRead “End the Fed” by Ron Paul.
Report Post »Polwatcher
Posted on May 26, 2011 at 9:33amThere ought to be jail door out there with Bernanki’s name on it.
Report Post »Snowleopard {gallery of cat folks}
Posted on May 26, 2011 at 9:35am@Cobra Blue
@Real:
Indeed, and my choice has been made a long time back.
Report Post »BJColter Country Music Iconoclast
Posted on May 26, 2011 at 9:36amThis has been happening since Aaron Burr ripped off the citizens of New York and started the Manhattan Bank, aka the Federal Reserve. Patriots have been fighting these bastards since, with Alexander Hamilton laying down his life to protect our then fragile government from their takeover. Be a patriot-join the TEA PARTY REVOLUTION! Here’s our new theme song.
http://www.youtube.com/watch?v=wXvRDmM5Zx4
Report Post »TomFerrari
Posted on May 26, 2011 at 9:40amDodd, Frank, Fed,
Report Post »WAKE UP AMERICA!!
They are printing us into the poor house!
thebarbarian
Posted on May 26, 2011 at 9:52amthese were not that secret. anyone who listens to npr already heard this. he illuded to this a while back.they think we’re not listening . as usual the left is wrong.
Report Post »lovenfl3
Posted on May 26, 2011 at 9:55amNotice how the administration continues to attack the “evil” bankers, yet they keep giving them more money. Which one is it? I’ve never goven money to someone I think is evil. Does that make any sense at all? http://www.youtube.com/watch?v=jiuk0tLj-I4
Report Post »techengineer11
Posted on May 26, 2011 at 9:59amNews of the day in my opinion. What would your hero Herman Cain do about this since he doesn’t even believe that the fed needs auditing? lol
This is really sick and it is the funding for the Apartheid which I speak of continually.. The head of the snake needs to be cut off!!!
Report Post »DIOS BENDIGA AMERICA ... JESUCRISTO ES EL SEÑOR!
Posted on May 26, 2011 at 9:59amI am not the brightest bulb in the pack, but if I could get a 100 million @ .01 and invest overseas at a marginal rate of return at .04, I could get a few million in my pocket and then give back the free money.
Maybe I would vote for Obama with that kind of “change”!
Report Post »NOTAMUSHROOM
Posted on May 26, 2011 at 10:06am@Cobra, Real, Snow
I’m with you guys. Until then, starve the beast!
Report Post »lylee
Posted on May 26, 2011 at 10:21amMove along kids, nothing to see here.
Report Post »jackrorabbit
Posted on May 26, 2011 at 10:36amWhen will the Congress wake up and investigate the FED, and then shut it down?
Report Post »jb.kibs
Posted on May 26, 2011 at 10:38amffs…
Report Post »Evileye
Posted on May 26, 2011 at 10:38amBefore this is all washed out we will face a collapse not unlike 1929.
Report Post »They claim this is a recession. Really! from 1929 until 1941 when the war broke out there were
a lot Cycles in the economy.
I was a school kid in 1930 and remember the problem that my parent faced.
we moved around the area as my father looked for work. I went to five different schools in one year in 1938.
So if you think this cannot hit bottom you haven’t lived long enough.
we are so far in the hole financially that it will take generation to pay off the debt.
and the politician only want to dig us deeper in.
they live in a dream world and if some prudent measure are not taken will turn into a night mare
@ Coyote2
Posted on May 26, 2011 at 11:20amLook at it this way. The “fed” is NOT FEDERAL by any means. It’s greedy parasitic jew banks that create this money out of thin air. It isn’t even printed anymore, but created on a computer with a few keystrokes, then borrowed to users at usury. Even at 1%, on 80 BILLION it’s a nice chunk of change when the cost is ZERO..
Report Post »APatriotFirst
Posted on May 26, 2011 at 11:25amNow we know where Obama keeps his off shore accounts.
Report Post »CatB
Posted on May 26, 2011 at 11:49amYes .. little wonder that American Seniors are struggling .. with CD rates so low that they lose money every month … time to stop this insanity.
TEA!
Report Post »TheLascone
Posted on May 26, 2011 at 12:19pmDo you know how much money you could earn with a loan like this ? PLENTY !
Report Post »http://www.flickr.com/photos/23630227@N06/5384746589/in/photostream/
getalong
Posted on May 26, 2011 at 1:03pmI am so weary of all the corruption going on in this administration. It is one thing after another, and yet congress and the office in charge of investigating government corruption remain silent.
Report Post »Malachai
Posted on May 26, 2011 at 1:28pmAnd let’s not forget Herman Cain 100% supports the Fed and is AGAINST auditing them… He’s trying to backpedal now that their dirty laundry is airing (thanks to us investigating them) but his stance is clear; The Fed is A-OK!
Report Post »GONZO_G
Posted on May 26, 2011 at 3:17pm@Tech,
Herman Cain said he is not opposed to auditing the Fed but wouldn’t run lead on it. Re would rather let someone else run the audit ( my guess would appoint someone ).
His focus would be to get our economy back on track.
Report Post »pcj
Posted on May 26, 2011 at 9:38pmHere is a good site on the Federal Reserve: http://www.scionofzion.com/federalreserve.htm
Report Post »There is a book called “The Creature from Jekyll Island” that tells more about it, and Glen Beck’s book “Broke” has a good chapter on how certain people conned Woodrow Wilson into signing the Federal Reserve into being. (Wilson later apologized) Whether you like Glen Beck or not, his background as a history teacher makes this an excellent book telling how presidents down the line have all contributed to the financial mess we are in. When you learn what the Fed is (not federal and not a reserve or bank) then you will understand why Ron Paul is so strong on auditing them. Last fall they had three trillion dollars they could not account for! Look on YouTube for Alan Grayson interviewing one of the head people at the Fed…it’s unbelievable and disgusting at the same time.
chazman
Posted on May 27, 2011 at 4:31amI apologize, but why are we paying taxes? Should we continue to pay … taxes? Should we wait to pay our taxes until after we take our country back from these corrupt politicians / bureaucrats? The moment I am given an IOU for a tax refund is the moment I stop paying taxes …
Remember, a lousy $850,000 was given to some African toilet country not to long ago to teach their men how to properly wash their balls before they had sex with their GOATS! This was in an effort to prevent disease …
I apologize, but why are we paying taxes? Just asking.
Report Post »SonOfaCommunist
Posted on May 27, 2011 at 6:08amFollow Utah…Gold and Silver!
Report Post »