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Secrets Of The "Fed" Revealed

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Mike

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If this doesn't boil your blood, you are dead.....................


For more than two years, the Fed and the banks it bailed out during the 2007 to 2009 financial crisis have kept many of the details of the massive, multi-trillion-dollar bailout a secret. But, thanks to Freedom of Information Act requests, 29,000 pages of bailout details are pouring out of the Fed at last, and those details are explained in an extended and damning report by Bloomberg Markets magazine. Among the biggest revelations:

$7.77 trillion: the total amount doled out in aid by the Fed to all the banks, as of March 2009, which Bloomberg notes surpasses 50% of the value of "everything produced in the US that year." In comparison, the $700 billion TARP "at least had some strings attached," says one House Democrat. "With the Fed programs, there was nothing."



• $1.2 trillion: the largest one-day amount given out to the banks by the Fed, on Dec. 5, 2008.
• $13 billion: the estimated amount 190 banks earned by getting loans from the Fed at below-market rates.
• $146.3 billion: the amount America's six largest banks paid in compensation in 2010, up nearly 20% from five years earlier. That works out to an average of $126,342 per employee.
• $86 billion: the amount Bank of America owed the central bank on Nov. 26, 2008—the day its CEO described BofA to shareholders as "one of the strongest and most stable major banks in the world," which Bloomberg shares as an example of the secrecy surrounding who received billions, and when.
 

TexasBred

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Mike this doesn't give a lot of detail into what they are referrng to as loans. Banks on a daily basis deposit funds with the fed or borrow from the fed basically in nothing but "overnight" transactions. Borrow at 5:pM to meet liquidity requirements and pay it back the next morning. The same with depositing excess funds overnight and earning one day/night of interest. Considered "loans" but disclosed on bank financial sheets as "Fed Funds Purchased" or "Fed Funds Loaned". This has been a common practice for ages...legal and encouraged.
 

Mike

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With all due respect, I totally understand the relationship between banks and the Fed.

But these loans were secretive and well below market value. What if the banks had collapsed after taking out these loans? It was highly possible. These were "Bailout Loans" for bad prior decisions.

Then the taxpayer would have footed the bill with nothing to show for it. We could have become a 3rd world country overnight.

Think about the immensity of the loans and the amount of payroll afterwards.

What about the lies told by the CEO's just to keep the stock prices (of which they own a major share) afloat?

http://news.businessweek.com/article.asp?documentKey=1376-LVDMGO1A74E901-5CG1C7JPCU5J1O688G3J3C73JE
 

TexasBred

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Mike said:
With all due respect, I totally understand the relationship between banks and the Fed.

But these loans were secretive and well below market value. What if the banks had collapsed after taking out these loans? It was highly possible. These were "Bailout Loans" for bad prior decisions.

Then the taxpayer would have footed the bill with nothing to show for it. We could have become a 3rd world country overnight.

Think about the immensity of the loans and the amount of payroll afterwards.

What about the lies told by the CEO's just to keep the stock prices (of which they own a major share) afloat?

http://news.businessweek.com/article.asp?documentKey=1376-LVDMGO1A74E901-5CG1C7JPCU5J1O688G3J3C73JE

Still have to question the article and disagree with the whole thing. Note the one quote;
The Fed didn't tell anyone which banks were in trouble so deep they required emergency loans of a combined $1.2 trillion on Dec. 5, 2008, their single neediest day.


As I said it was necessary, it is encouraged and always has been and STILL IS !!!Overnight loans mostly. And always below what you might refer to as "market rates"...(check our fed funds rate)....money coming in from other banks is also earning "below market rate" as well as it often is a one day deposit. Next time you look at your bank's or any other bank's "Statement of Condition" look for the lines "Fed Funds Sold" or "Fed Funds Purchased".
 

Steve

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Next time you look at your bank's or any other bank's "Statement of Condition" look for the lines "Fed Funds Sold" or "Fed Funds Purchased".

if either is drastically higher then the other it is a sign of mismanagement..

to high of a borrow rate reduces earnings and to high of a lent rate reduces earnings..

a good bank management will have the deposits balanced and will strive for a fair earning rate.

I deal with two local banks, one is overly conservative and it shows slightly lower overall earnings and consequently lower earned interest rates, it current goal seems to be to enter new markets and buy up local banks to add to it's growing asset balance, it often has excess overnight deposits..

the other is smaller, conservative but fair, it has no intention of seeking out new markets as it is doing well in the one it dominates.. the interest yield is a full percentage point over the larger bank and it's stock worth almost double.. it borrows funds occasionally, and it seldom has any record of large overnight deposits..

about everyone I know has invested in the first bank and lost about half their money if they sold their stock..

when I was offered shares at their IPO a few years back I declined.. and while I still deal with them and trust the overall solidity of the bank .. I have made more by not investing and keeping my money in a money market fund with the other bank instead..

It has shown me one thing,... That the larger banks with greater growth often comes at a price to the investors and depositors..

we need to wind down these large banks..
 

TexasBred

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Steve said:
Next time you look at your bank's or any other bank's "Statement of Condition" look for the lines "Fed Funds Sold" or "Fed Funds Purchased".

if either is drastically higher then the other it is a sign of mismanagement.. No...can simply be very high and unexpected "good" loan demand to high of a borrow rate reduces earnings and to high of a lent rate reduces earnings..

a good bank management will have the deposits balanced and will strive for a fair earning rate. Not necessarily but there is a term called "Asset/Liability Management" where you make an attempt to balance maturing liabilities against maturing assets. I deal with two local banks, one is overly conservative and it shows slightly lower overall earnings and consequently lower earned interest rates, it current goal seems to be to enter new markets and buy up local banks to add to it's growing asset balance, it often has excess overnight deposits.. This bank is probably taking "brokered fund" which require that you pay premium rates are usually very volatile and do little more than raise your cost of operations and lower net income BUT you look BIG on paper. These are the banks to watch. the other is smaller, conservative but fair, it has no intention of seeking out new markets as it is doing well in the one it dominates.. the interest yield is a full percentage point over the larger bank and it's stock worth almost double.. it borrows funds occasionally, and it seldom has any record of large overnight deposits.. Sounds like a well managed bank especially if capital accounts are strong. about everyone I know has invested in the first bank and lost about half their money if they sold their stock..

when I was offered shares at their IPO a few years back I declined.. and while I still deal with them and trust the overall solidity of the bank .. I have made more by not investing and keeping my money in a money market fund with the other bank instead.. Not bad...no huge return but guaranteed and insured. It has shown me one thing,... That the larger banks with greater growth often comes at a price to the investors and depositors..

we need to wind down these large banks..
 

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