Bloomberg Published In-Depth Analysis of the Fed's Loans to Banks During the 2008-2009 Crisis

Another day, another great piece of work from Bloomberg and another stone thrown at the Fed.
They have even published a nice charting tool to make more graphical sense all the data.

Here are a couple shocking quotes:
The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

By late 2008, it was accepting “junk” bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation. 
Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25 percent of the collateral was foreign-denominated.

The Business Insider has a nice summary of the figures published:
According to Bloomberg, the $1.2 trillion is about the same amount as homeowners owe on 6.5 million delinquent mortgages, three-times the size of the federal deficit in 2008, and more than the total earnings of federally insured banks in the last decade. 
The Fed had refused to disclose the specific sums it lent to the banks in 2008 — but was compelled to by the Dodd-Frank regulatory reform law. 
The leader-board:
• Morgan Stanley — $107.3 billion
• Citigroup — $99.5 billion
• Bank of America — $91.4 billion
• UBS — $77.2 billion
• Goldman Sachs —$69 billion
• Deutsche Bank — $66 billion
• Barclays — $64.9 billion
• JP Morgan Chase — $48 billion
• Hypo Real Estate Holding — $28.7 billion
• Societe Generale — $17.4 billion
And the more it goes, the more the market is building a bottom on hope that the Fed will save stock and commodities speculators — you even start hearing about people forecasting or recommending the Fed to come and buy in stock index futures contracts. Lunacy has no limits when you combine the arrogance, ignorance and greed of the financial analysts and market strategists.

Unfortunately for those players, the more it goes, the more The Bernank will be crippled by the political forces and the public opinion. Which is very good, and yet confirms my deflationary bias.

No comments: