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Showing Original Post only (View all)I cannot believe the Fed gave Citigroup 2.5 Trillion Dollars! [View all]
Last edited Mon Sep 3, 2012, 01:33 AM - Edit history (11)
Seriously, I cannot believe it because it IS NOT TRUE. But the claim is widespread on the internet, sourced to the GAO FED audit report.
Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts
http://www.unelected.org/audit-of-the-federal-reserve-reveals-16-trillion-in-secret-bailouts
The numbers that are being touted all over the internet are from Table 8 of the GAO report. Table 8 shows, for instance, that the Fed assisted Citigroup to the tune of 2.5 trillion dollars, and that the bulk of that total, over $2 trillion, was from the Fed Primary Dealer Credit Facility. (PDCF) And the explanation of table 8 is right there in the report adjacent to table 8 so it is hard to give anyone the benefit of the doubt for "missing" it. It explains what that number means:
Table 8 and notes Page 130-131
http://www.scribd.com/doc/60553686/GAO-Fed-Investigation#outer_page_130
In its efforts to stabilize the banking industry the FED made a lot of loans to banks to beef up their capitalization. The simplest way for the FED to loan to a bank is through PDCF, which is usually an overnight loan program. For that reason PDCF is accounted daily. Every day is counted as a "new" loan.
So if the FED wanted to capitalize CITI with a loan of $50 billion for eight months and used the PDCF overnight loan program, renewing the overnight loan daily, the figure in table 8 would be well over $2 trillion, even if it was just a loan of $50 billion that was paid back at the end of eight months.
There is nothing wrong with the supposed $2 trillion in PDCF loans. Unlike TARP, a PDCF loan is not an assumption of bad debts on the Fed books. It is a short term loan.
How that gets to be a give-away of more than $2 trillion... by that standard a slot junkie has won millions of dollars playing slot machines. He has also lost millions, of course. And I have quite a bit of money in the bank. My bank balance on Monday, plus my bank balance on Tuesday, plus my bank balance on Wednesday...
I am going to tread lightly in this comment because I like and admire Bernie Sanders, but his claim that "the Federal Reserve provided more than $16 trillion in total financial assistance" to banks is intended to convey something to the listener that is clearly not true. So that is disappointing, and I will leave it at that.
As for the broader "Fed is the devil" movement on the internet, there is a reason that is primarily a Ron Paul deal. It is one thing to say that Ron Paul has some good ideas (legalizing drugs, non-interventionism) but it is something different to say that Ron Paul has some good ideas about economics. Ron Paul is an economic crackpot. A pure flat-earther on all matters monetary.
I despise Citigroup.
The banks are animals. They are malignant. Their perfidy knows no bounds. If the FED was in a position to give them a gift of $16 trillion they would take it and laugh. No doubt.
And there is no doubt that the Fed, congress, the President and Tim Geithner all gave stabilizing banks and wall street priority that was not given to the ordinary person. There is no doubt that the financial sector benefited unduly. Though most of this stuff was repaid long-ago an interest free loan is still a nice thing to have and nobody offered me one. I owe money to Citicorp at more than 20% interest so it doesn't make me happy for them to be receiving any 0% loan. But that loan is not "my money." It is not from "my taxes." (The FED does not have access to federal revenues.)
If someone wants to promote the (very valid) idea that banks are favored unduly it does not help to say banks were given $16 trillion because first, it is a deception. and worse, it is also sort of thing that many informed listeners will recognize as implausible at first blush. If banks were given $16 trillion you wouldn't need an audit to discover itthe Gross Domestic Product of the United States of America is only about $15 trillion.
Adding insult to injury, I found one instance of this same less-than-honest article over the fake claim that the article is written by Paul Krugman, with his picture and everything! Needless to say, Krugman's only response to these claims would be a face-palm.
http://parkercountyblog.com/2011/08/15/audit-of-the-federal-reserve-reveals-16-trillion-in-secret-bailouts/