Even Without TARP, Banks Are Still Heavily Subsidized

[AllentownJake]

Despite the massive repayments of TARP money coming from our biggest banks, the financial system is still very much dependent on the rescue operations of the government.

Perhaps the best illustration of this is the massive balance sheet of the Federal Reserve, which has inflated by purchases of $1.058 Trillion of mortgage backed securities.

The Atlanta Fed's most recent financial highlights point out that in the last two months, the average weekly amount of MBS purchased has averaged $17 billion. That's a significant slowdown from a prior average of $23.4 billion per week. And last week the Fed purchased only $16 billion.

Still, cumulative numbers matter. Prior to this year, the Federal Reserve had never purchased mortgage backed securities. Now the Fed owns more than 15 percent of the market in agency backed mortgage securities, Fannie Mae and Freddie Mac combined own roughly 17 percent of the market, while commercial banks own around 20 percent.

http://www.businessinsider.com/even-without-tarp-banks-are-still-heavily-subsized-2009-12

Probably why the idea of auditing the FED has people shitting their pants.

[leftstreet]

1. Interesting article

Thanks for posting

[dkf]

2. Oh you have no idea do you?

Think about the FDIC. The Federal Government basically insures all the freaking deposits in the entire United States banking system. All of it that is under FDIC limits that is.

So the banks take this money, pay you hardly anything in interest, and they do who the hell knows what with it.

Really, what is TARP compared to that?

The Entire banking system is dependent on the Federal Government. Without FDIC insurance, everyone would be very interested in what the bank is doing with their money. But its insured, so...whatever.

[AllentownJake]

3. Seeing that Tim gave $ for $ on contracts from AIG

I'm guessing the MBS weren't purchased at Fair Market Value, and a real audit of the FEDs balance sheet would uncover that and other interesting Fed actions this year.

[dkf]

5. So is it simply ugly or is it potentially destabilizing?

[AllentownJake]

6. We effectively nationalized them

without taking ownership is my bet.

Overpaid for their assets, prevented their failure...England couldn't get away with the shit that the Fed pulled so they had to nationalize a few of their big boys.

[dkf]

8. So it is simply revealing.

Is there any point at which the Fed balance sheet leaves real cause for concern?

[AllentownJake]

9. When you have the power to print money and determine interest rates for the world's largest economy

You really need to fuck up to blow up your balance sheet.

[Greyhound]

7. What they keep dancing around is that there is nothing upon which to "stabilize".

The real estate that all these side bets are based on are only a tiny fraction of the "equities" valuation, and those values were wildly over-stated because of the bubble and manufactured inflation.

[AllentownJake]

10. Why do you think they are doing everything possible to prop up the market nt.

[Greyhound]

13. It's their life blood. "The Market" is the pool they use to hide and justify,

without it there is no way for them to misdirect people's attention away from the huge drain that goes into their own portfolios. There is a new book out by a former Goldman manager that explains this mess pretty simply... ( I saw her hawking it on a talk show, can't remember her name off-hand). Bottom line is that most of what the faux-banks are holding as assets are nothing but fantasy paper created by fiat and backed by nothing but the companies claim that it is worth something.

By conflating currency distribution and control (the necessary part of what this "industry" does) with all the rest of their activity (that boils down to simple theft), has created the illusion of their importance.

[girl gone mad]

4. You should show the graph.

Here's a better one, though:

[bertman]

11. I wish I hadn't seen this right before going to bed.

:(

but I recced it anyway. We all need to know about this, but hardly anyone gives a shit. Or maybe it's that they really are afraid of what they'll find out.

[AllentownJake]

12. kick