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December 14, 2011

The size of the bailout keeps growing

Last week, I wrote about the revelation that the size of the bailout was $7.77 trillion, much larger than publicly revealed during the time. Via reader Mark, I read this article by former congressman Alan Grayson that says that the audit that was enabled by legislation that he and Ron Paul initiated reveals that the size of the Federal Reserve bailout of the big banks all over the world is now even greater than that, to the tune of $26 trillion, which is almost twice the size of the entire GDP of the US, which is a little over $14 trillion. Grayson explains the key numbers that the audit revealed:

Page 131 - The total lending for the Fed's "broad-based emergency programs" was $16,115,000,000,000. That's right, more than $16 trillion. The four largest recipients, Citigroup, Morgan Stanley, Merrill Lynch and Bank of America, received more than a trillion dollars each. The 5th largest recipient was Barclays PLC. The 8th was the Royal Bank of Scotland Group, PLC. The 9th was Deutsche Bank AG. The 10th was UBS AG. These four institutions each got between a quarter of a trillion and a trillion dollars. None of them is an American bank.

Page 205 - Separate and apart from these "broad-based emergency program" loans were another $10,057,000,000,000 in "currency swaps." In the "currency swaps," the Fed handed dollars to foreign central banks, no strings attached, to fund bailouts in other countries. The Fed's only "collateral" was a corresponding amount of foreign currency, which never left the Fed's books (even to be deposited to earn interest), plus a promise to repay. But the Fed agreed to give back the foreign currency at the original exchange rate, even if the foreign currency appreciated in value during the period of the swap. These currency swaps and the "broad-based emergency program" loans, together, totaled more than $26 trillion. That's almost $100,000 for every man, woman, and child in America. That's an amount equal to more than seven years of federal spending -- on the military, Social Security, Medicare, Medicaid, interest on the debt, and everything else. And around twice American's total GNP.

These are staggering amounts. And it was all done under the radar, using the secrecy with which the Federal Reserve and the government use when it comes to serving the oligarchy.

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Comments

I'm beginning to think there's only two possible explanations left for the willingness of all US politicians to create such enormous and unpayable mountains of debt:

(1) They're deliberately trying to crash the entire world economic system.

(2) They're so stupid and uneducated that they think accounting figures shown to them in Croesus mode are the actual numbers, and nobody has realized it yet.

In Croesus mode, $16,115,000,000,000 is shown as $16,115,000. When the totals are large enough, the numbers below a certain threshold are considered "insignificant" and not shown. The top of financial statements will have the small remark, "(in 000,000s)", and the idiots in control haven't noticed it.

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Posted by P Smith on December 14, 2011 03:38 PM

I would suggest reading this before jumping to conclusion:

http://www.washingtonpost.com/opinions/fed-bashing-gone-wild/2011/12/09/gIQA6sMDoO_story.html

Posted by zaybu on December 14, 2011 04:02 PM

Stalin said about deaths, "One death is a tragedy, one million is a statistic." Stalin was speaking about people, but the same holds true for monetary losses.

Posted by Heidi Nemeth on December 14, 2011 04:18 PM

Heidi,

That quote is attributed to Stalin but there is no record of him ever having said it.

But your point about us becoming numb to huge numbers still holds.

Posted by Mano on December 14, 2011 04:35 PM

There is no question that, without the Fed's support, the economy would have slipped into a major Depression. At this time, the European situation is dire exactly because the European Central Bank lacks the Fed's ability to act as a lender of last resort.
Also, the various figures are somewhat iffy: the Fed can credibly fulfill his role only if it can provide unlimited liquidity. In other words, it sets targets for its monetary policy, and then uses whatever $ amount it is required to achieve its target. Conversely, if the Fed fixed a limit on its intervention (say, $16T), it would only invite speculators to mount an attack sufficiently large ($16T+$1) to overrun the Fed.
The real problem is that, unlike the Swedish bailout or even the S&L resolution trust, the government has socialized the losses, with practically no upside for citizens and taxpayers.

Posted by Vincenzo on December 15, 2011 06:24 PM

Thanks for this post. I definitely agree with what you are saying. I have been talking about this subject a lot lately with my father so hopefully this will get him to see my point of view. Fingers crossed!

Posted by Corey Pannebaker on December 18, 2011 05:33 AM

This was an eye opening blog post for me to read. I had no idea that the bail out was that much money. After reading about all these problems, I will never work in the finance industry.

Posted by Brian on December 22, 2011 03:33 PM