Comments on: The Fed’s secret giveaway to European banks A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: asdasmos Sun, 12 Jun 2011 17:44:04 +0000 ve-feds-600-billion-stealth-bailout-fore ign-banks-continues-expense-domestic-eco nomy-?page=1

By: mikehira Fri, 03 Jun 2011 13:56:28 +0000 The program was not a secret because it was reported in the NY Times: 8/guide-to-feds-alphabet-soup/

on SourceWatch, a Fed Watchdog: le=Total_Wall_Street_Bailout_Cost

in the Fed 2008 OMO report, page 11: o2008.pdf

and in the daily summary of OMO transactions: m/historical/tomo/search.cfm

The primary dealers were allowed to bid for loans if they provided Agency MBS as collateral. On any given day, the highest bids got the loans.

By: Chivelry Wed, 01 Jun 2011 15:30:30 +0000 May be a case whereby the CDS on RBMS were run thru Citi(and others) and essentially, the Fed made good those exposures.
Why oh why do we let gravey trains go out of control and pop bubbles.
All any markets need is more transparency, once all participants can see, overheating doesn’t happen.
If Dodd-Frank bill does anything.. please make all for forms of dirivitives only tradeable and seen at the counter, instead of a closely held secrect, by those that make those same vehicles.

By: hsvkitty Sun, 29 May 2011 17:25:46 +0000 A fed economist comes to the defense of the fed. It wasn’t secret because if you were looking they had it on the website… not detailed… but who needs details?

Dr. David E. Altig is senior vice president and director of research at the Federal Reserve Bank of Atlanta. 011/05/secret-loans-that-were-not-so-sec ret.html

Now that the Dodd-Frank financial reform bill has passed, big banks have been lobbying aggressively against restrictions they believe are too harsh. Among the top items on the industry’s lobbying agenda are stronger capital regulations, as well as a Consumer Financial Protection Bureau, new rules on derivatives trading and restrictions on proprietary trading. 6/us-lobbying-imfreport-idUSTRE74P7AF201 10526

By: breezinthru Sat, 28 May 2011 21:38:52 +0000 @Woltmann

I can appreciate what you are saying but I will never accept criminal behavior as a necessary evil no matter how much money the criminal has.

By: Woltmann Sat, 28 May 2011 11:54:15 +0000 Where did the Fed get the authority to do this? I don’t think they had it legally because I don’t think they have the authority to back-door foreign banks. They were just the most direct and invisible conduit available. Everyone is always screaming about criminal accountability but in this case (and in Blankfein’s cramming down the AIG bailout) the criminal charges would have to fall at the top – Bernanke, Geithner, Paulson – and that isn’t going to happen. It’s time we all act our age, myself included, and accept the fact that political corruption is the price of all financial systems, some are just a lot more corrupt than others ..

By: breezinthru Sat, 28 May 2011 07:35:43 +0000 I think that those European countries did know about the loans. As America’s financial system staggered, so did the European financial system and hedge funds who did business with those banks.

The entire debacle, including the sudden danger to Europe’s banks, originated upon the the popping of a fetid American bubble. So, in a way, it was good manners, an apologetic gesture offered in the interest of maintaining/restoring the trust which is so vital in a system where no bank has enough cash to instantly cash out all of its customers, but it much more than that.

The European financial system was in jeopardy quite because our systems are so interconnected. It would do no good to pull out all the stops in trying to stabilize America’s financial system if the European financial system failed because, even on a good day, our system would have a difficult time surviving their system’s failure.

And our system was not having a good day; it was teetering on the brink of total collapse.

By: hsvkitty Fri, 27 May 2011 22:43:26 +0000 And what were the low interest 11-figure sum loans backed by… not that the taxpayers need to know such trivial details…

It was secret because no one needs to know they were reinforcing the house of cards.

By: jomiku Fri, 27 May 2011 17:48:17 +0000 Here’s a guess. I’m relying on a couple of papers that analyzed BIS data after the fact and a key fact, that the Fed made an emergency loan to the ECB of something like $630B when the crisis hit. The mechanism described – which I first heard about through Brad Setser’s old blog – is that Lehman was a huge US money market issuer but that no one – literally – knew that European banks were very heavily invested in the US money markets for short-term funding. The reasons are somewhat obscure but they invested through London because there were basically no reporting rules on the capital flows. The process then goes: Lehman collapses, the European banks need dollars because they otherwise have no short-term money, so they grab what they can, causing a complete absence of dollars in the system, then the system completely locks up with credit indicators going skyward – which makes sense because now you can see why banks didn’t want to lend to each other, because if you needed to borrow you were in danger of short-term collapse – the Fed pumps dollars to the ECB and now it looks like they also kept some of the major European banks afloat. Maybe there was a side deal with the ECB. Maybe they were asked to step in because these defaults would have had crushing consequences to the system. Sounds like it.

Bottom line: lack of reporting, particularly of capital flows, can have really, really bad consequences.