Have you had some fun reading about the scandals, the bankruptcies, and who some of the culprits are? Did the demise of Barings, BCCI, LTCM, and Enron, and the problems encountered in Orange County, Detroit, and Jefferson County, whet your appetite for more sleuthing?
Keep reading the works of the people who covered the 2007-10 financial crisis. You’ll get there. Presently, however, what do you think about when you see the number “16 trillion” in front of you?
A Forbes 9-20-11 headline read, “The Fed’s 16 Trillion Bailouts Under-Reported.” What do you all think this headline means? Weren’t we told TARP was a few hundred billion here and a few hundred billion there? Where do we find printed information about this huge number?
We have to go to the website of Vermont Senator Bernie Sanders. He was able to orchestrate, through the Dodd-Frank bill, the first-ever partial audit of the Federal Reserve. The goal was to determine how taxpayer money was spent, by the FED and without Congressional discussion, to alleviate the global financial crunch. His findings are offered through a Government Accounting Office report carried in its entirety on his website. The results can make one’s jaw drop. Critics of the critics say these bailouts were “normal” short term loans, paid back, that many banks utilized for their day-to-day workings.
I remind you that a few investment banks had to apply to become commercial banks so they would have access to these funds. I could be a name dropper here, but you can find out who they are merely by reading the names of the institutions who received the lion’s share of those funds. That list is on page 131 of the GAO report.
The largest single set of cumulative short term loans was 2 1/2 trillion dollars…..to one institution! The second largest number was two trillion dollars, given to one of those “converted” investment banks. The third largest number was 1.9 trillion…….and on and on down the line. Go in and have a look. Taxpayers propped up foreign as well domestic institutions.
The status of the nation’s money supply, after the failure of Lehman Brothers, was that of major contraction. Cash was in extremely short supply, and institutions of all varieties, on and off shore, were selling massive stock and bond portfolios for the simple reason to raise needed cash.
Why did cash have to be raised so quickly? That story is for a future column. Yep…..part of the problem again is that “D” word.