The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank.
[Congress] had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008
The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show.
What’s unforgivable is the way policymakers, both at the Fed and elsewhere, basically declared Mission Accomplished as soon as the panic in financial markets subsided and stocks were up again. When spring rolls around, we’ll reach the third anniversary of Ben Bernanke’s declaration that “green shoots” were making an appearance — and there will still be 4 million Americans who have been out of work for more than a year. Yet there has been no sense of urgency about dealing with unemployment; indeed, most of the elite conversation has been about stuff like cutting Social Security payments a decade or two from now. Linkazoo
One comment about some of the folks pushing back against this massive total: Yes, there is a big difference between a $100 lent for 3 days, and a $100 lent overnight rolled over 2 more times. And there is an enormous difference when temporary overnight lending lasts for three years.
Overnight lending, by its definition, is temporary, short term, lower risk, modest impact. It exists to allow slightly over-extended banks to meet their reserve requirements. But rolling overnight lending repeatedly for 3 years is none of those things. And it makes a mockery of these same reserve requirements, and the protective purposes they are supposed to serve.
The amount of overnight lending reflects how broken our financial system really is. A well capitalized, moderately leverage system does not require this massive liquidity from a central bank — interbank lending should be sufficient. What the data reveals is that the financial sector remains dangerously under-capitalized and overleveraged.
If you're interested in why there haven't been any prosecutions you should read Bill Black's blog regularly. He was part of the team that referred something like 10,000 prosecutions during the S&L scandal and while there are any number of motivations for why this hasn't happened now (all of them related to crony capitalism), the structural reason is apparently that there have been no referrals for prosecution. The SEC has been destroying evidence for years, as Taibbi reported on, and settling left and right as is widely known. For the DoJ to investigate something securities related, someone normally refers a case for prosecution along with all this important data about what happened - because the DoJ's expertise isn't in figuring out securities frauds I guess? Anyway, that, apparently, hasn't happened.
For example, ocean freight shipping essentially stopped completely for a week, or so, because firms involved couldn't get the operating loans they normally got to function.
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