Unbelievable

I should qualify the title of this post with a word that begins with F and ends in G.

You thought TARP was a huge program; the Fed lent twice as much - $1.2 trillion - to the financial behemoths who bear a large share of the responsibility for the Great Recession we are still in. Bloomberg has to be congratulated for the huge effort - including litigation and an act of Congress - it went through to tell us how and to whom the Fed loaned our money. They will probably win a Pulitzer for this article. 

$1.2 trillion is not small potatoes. It "was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg." However, one must keep in mind, that this money was loaned and, by and large, has been paid back. Plus, we have made some money from the deal.

Morgan Stanley, which was supposedly a very sound institution, got $107.3 billion  (almost 9% of the total), while the problem child, Citigroup, got almost as much ($99.5 billion). We also helped foreign banks; RBC got $84.5 billion, UBS $77.2 billion.

These loans were given only when the Fed received 'sufficient' collateral. The problem here was the quality of the collateral. It accepted junk bonds and took a real chance by accepting stock. Furthermore, just about all of the recipients lied about needing the funds and the Fed said nothing then about the size of the loans and revealed the details only when forced to.

We forced GM to declare bankruptcy and get rid of Wagoner. Why didn't the same thing happen here? Were the stockholders of these financial firms better people than the GM stockholders?

Walter Jones, a Republican Congressman no less, summed up one side of the situation, “Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic? They get help when the average businessperson down in eastern North Carolina, and probably across America, they can’t even go to a bank they’ve been banking with for 15 or 20 years and get a loan.” 

Is this what Bernanke learned from his studies of the Depression? Would this have happened if Geithner were not Treasury Secretary (I know the Fed is supposed to be an independent entity but I would think that Geithner would have spoken up for his friends in the business.) We had an auto industry czar and it looks as though no one is really complaining about the auto industry now. I think we should we have had a financial industry czar.