Economic Crisis | FORECLOSURE FRAUD | by DinSFLA

Tag Archive | "Economic Crisis"

Secrets of the Bailout, Now Revealed – Gretchen Morgenson

Secrets of the Bailout, Now Revealed – Gretchen Morgenson


I’ve always said if walls could talk in these secretive rooms, look no further than Gretchen to shut it down with a story.

NYT-

A FRESH account emerged last week about the magnitude of financial aid that the Federal Reserve bestowed on big banks during the 2008-09 credit crisis. The report came from Bloomberg News, which had to mount a lengthy legal fight to wrest documents from the Fed that detailed its rescue efforts.

It is dispiriting, of course, that we are still learning about the billions provided to various financial firms during the crisis. Another sad element to this mess is that getting the truth requires the legal firepower of an organization as rich as Bloomberg.

[NEW YORK TIMES]

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Cummings Requests Hearing on Secret Government Loans to Rescue Banks

Cummings Requests Hearing on Secret Government Loans to Rescue Banks


New Bloomberg Report Estimates that Banks Reaped $13 Billion from Below-Market Rate Loans

Washington, DC (Nov. 28, 2011) – Today, Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, sent a letter to Chairman Darrell Issa requesting that the Committee hold a hearing with Federal Reserve Chairman Ben Bernanke and officials from the nation’s largest financial institutions that benefitted from trillions of dollars in previously undisclosed government loans provided at below-market rates.

“Many Americans are struggling to understand why banks deserve such preferential treatment while millions of homeowners are being denied assistance and are at increasing risk of foreclosure,” said Cummings.

Cummings requested the hearing in light of a report in Bloomberg Markets Magazine that revealed that the Federal Reserve secretly committed more than $7 trillion as of March 2009 to rescuing the nation’s top financial institutions, and that these banks “reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates.”

According to economists cited in the Bloomberg report, this “secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.”  The Bloomberg report disclosed that total assets at the largest six banks increased by 39% and executive compensation increased by 20% over the past five years.

According to the Bloomberg report, information about these secret loans was withheld from Congress as it debated reforms ultimately included in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and banks also failed to disclose this information to their shareholders.

The full letter follows:
November 28, 2011

The Honorable Darrell E. Issa
Chairman
Committee on Oversight and Government Reform
U.S. House of Representatives
Washington, DC 20515

Dear Mr. Chairman:

    I am writing to request that the Committee hold a hearing with Federal Reserve Chairman Ben Bernanke and officials from the nation’s largest financial institutions that benefitted from trillions of dollars in previously undisclosed government loans provided at below-market rates.

    In the past, the Oversight Committee has played a prominent role in investigating the actions of government entities and private sector corporations that led to the financial collapse.  On October 23, 2008, for example, former Federal Reserve Chairman Alan Greenspan testified before our Committee, stating:  “I made a mistake in presuming that the self-interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders.”

Yet, a report yesterday in Bloomberg Markets Magazine disclosed that the Federal Reserve secretly committed more than $7 trillion as of March 2009 to rescuing the nation’s top financial institutions.  As a result, the banks that received these loans “reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates.”  This report was based on 29,000 pages of Federal Reserve documents obtained under the Freedom of Information Act after a protracted legal dispute.

    According to economists cited in the Bloomberg report, the scope of these previously undisclosed loans resulted in a financial windfall for the banks.  For example, Dean Baker, co-director of the Center for Economic and Policy Research, stated:  “getting loans at below-market rates during a financial crisis—is quite a gift.”  Similarly, Viral Acharya, an economics professor at New York University, stated:  “Banks don’t give lines of credit to corporations for free.  Why should all these government guarantees and liquidity facilities be for free?”

    The Bloomberg report disclosed that this “secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.”  According to Federal Reserve data cited in the report, total assets held by the six largest U.S. banks increased 39% from 2006 to 2011.  In addition, based on data from the Bureau of Labor Statistics, employees at these banks received more than $146 billion in compensation in 2010, an increase of nearly 20% from five years earlier.  According to Anil Kashyap, a former Federal Reserve economist, “The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out.”

The Bloomberg report explained that Congress lacked access to information about the secret Federal Reserve loans while it debated reforms ultimately included in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  For example, former Senator Judd Gregg stated:  “We didn’t know the specifics.”  Similarly, Senator Richard Shelby stated:  “I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability.”  According to Neil Barofsky, the former Special Inspector General for the Troubled Asset Relief Program, “The lack of transparency is not just frustrating; it really blocked accountability.”

When Congress passed the Dodd-Frank Act, it required the Government Accountability Office to “conduct a onetime audit of all loans and other financial assistance” from December 1, 2007, to July 21, 2010.  Although GAO issued its report in July, it analyzed assistance—including mortgage-backed securities purchased through open market operations—with peak outstanding balances of only $3.5 trillion.  Even with respect to these amounts, GAO concluded:

The context for the Federal Reserve System’s management of risk of losses on its loans differed from that for private sector institutions.  In contrast to private banks that seek to maximize profits on their lending activities, the Federal Reserve System stood ready to accept risks that the market participants were not willing to accept to help stabilize markets.

    In addition to withholding information about these loans from Congress, banks also apparently failed to disclose this information to their shareholders.  For example, Kenneth D. Lewis, the Chief Executive Officer of Bank of America, told shareholders on November 26, 2008, that the company was “one of the strongest and most stable major banks in the world.”  According to the Bloomberg report, however, he failed to disclose that “his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.”

    Many Americans are struggling to understand why banks deserve such preferential treatment while millions of homeowners are being denied assistance and are at increasing risk of foreclosure.  Unfortunately, officials from many of these financial institutions declined to comment about these loans, including officials from Goldman Sachs, JPMorgan, Bank of America, Citigroup, and Morgan Stanley. 

For all of these reasons, I respectfully request that the Committee hold a hearing with the Federal Reserve chairman and officials from each of these financial institutions to examine these issues in greater detail.  Thank you for your consideration of this request.

                        Sincerely,

                        Elijah E. Cummings
                        Ranking Member

[ipaper docId=74060982 access_key=key-qgfj6rxm5qliut1229p height=600 width=600 /]

Source: http://democrats.oversight.house.gov

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Secret Fed Loans Gave Banks Undisclosed $13B

Secret Fed Loans Gave Banks Undisclosed $13B


After you read this, come back and read Matt Taibbi’s story: Woman Gets Jail For Food-Stamp Fraud; Wall Street Fraudsters Get Bailouts

See if any of this makes any sense?

 

Bloomberg-

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.

[BLOOMBERG]

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The Fed’s BIG Little $90,000,000,000 Secret

The Fed’s BIG Little $90,000,000,000 Secret


Federal Reserve Lending Revelations Intensify Criticism Of Central Bank’s Secrecy

HuffPO-

In the midst of the global financial crisis in 2008, the Federal Reserve lent Goldman Sachs, Credit Suisse and Royal Bank of Scotland at least $30 billion each at interest rates as low as 0.01 percent with no public disclosure of the details, Bloomberg News reported on Thursday.

The latest revelations about the covert infusions of credit provided by the Fed to some of the world’s largest banks has amplified accusations that the central bank is a power unto itself, operating according to its own devices and in the interest of major financial institutions — and beyond accountability to taxpayers.

“It just points out that this was about secrecy to protect banks basically from embarrassment from transparency, which is not supposed to be what the Fed’s about,” said Dean Baker, co-director of the Center for Economic Policy and Research, in Washington.

“That is the fundamental problem with the Fed,” Baker added. “They’re supposed to be an agency of the government, not an agency of the banks. But reflexively, there they are protecting the banks, again and again and again.”

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WSJ | Bank Group’s Chief Expects Elizabeth Warren’s Nomination Soon

WSJ | Bank Group’s Chief Expects Elizabeth Warren’s Nomination Soon


Wall Street Journal-

The White House isn’t saying much about whether Harvard law professor and consumer advocate Elizabeth Warren will be named to lead the new Consumer Financial Protection Bureau.

But the head of a key banking industry group believes it will happen soon.

Camden Fine, president and chief executive of the Independent Community Bankers of America, said Monday that he sees a “better than even chance” that President Barack Obama will nominate Ms. Warren to lead the new bureau.


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NYT | An Advocate Who Scares Republicans

NYT | An Advocate Who Scares Republicans


The Wednesday morning hearing was titled “Oversight of the Consumer Financial Protection Bureau.” The only witness was the piñata, otherwise known as Elizabeth Warren, the Harvard law professor hired last year by President Obama to get the new bureau — the only new agency created by the Dodd-Frank financial reform law — up and running. She may or may not be nominated by the president to serve as its first director when it goes live in July, but in the here and now she’s clearly running the joint.

And thus the real purpose of the hearing: to allow the Republicans who now run the House to box Ms. Warren about the ears. The big banks loathe Ms. Warren, who has made a career out of pointing out all the ways they gouge financial consumers — and whose primary goal is to make such gouging more difficult. So, naturally, the Republicans loathe her too. That she might someday run this bureau terrifies the banks. So, naturally, it terrifies the Republicans.

[Image credit: MSNBC]

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Testimony of Elizabeth Warren Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau

Testimony of Elizabeth Warren Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau


Testimony of Elizabeth Warren Special Advisor to the
Secretary of the Treasury for the Consumer Financial Protection Bureau
Before the Subcommittee on Financial Institutions and Consumer Credit
Committee on Financial Services
United States House of Representatives
Wednesday, March 16, 2011

The current economic crisis began one bad mortgage at a time. Mortgages that promised investors huge profits for low risks were the raw material of the securities that contributed to the near collapse of the worldwide economy. Irresponsible lending that encouraged people to buy homes with no realistic hope of ever paying off their loans has now led millions of families into foreclosure and bankruptcy. If there had been just a few basic rules and a cop on the beat to enforce them, we could have avoided or minimized the greatest economic catastrophe since the Great Depression. In the future, the new consumer bureau will be that cop.

[ipaper docId=50869746 access_key=key-a81fljm2c15vhtvrwbm height=600 width=600 /]

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