The Federal Reserve today released a trove of information, much of which was sought by Bloomberg’s Mark Pittman lawsuit, on its multi-trillion dollar programs to bail out the financial system.
The Huffington Post’s Shahien Nasiripour zeroes in on the massive subsidies the Fed gave foreign banks:
Deutsche Bank, a German lender, has sold the Fed more than $290 billion worth of mortgage securities, Fed data through July shows. Credit Suisse, a Swiss bank, sold the Fed more than $287 billion in mortgage bonds.
Those two European banks were the biggest sellers of mortgage-backed securities to the Fed.
Legendary money manager Bill Gross, who oversees more than $1.2 trillion at Pacific Investment Management Co. said last month during a television interview that part of his success over the last 18 months was due to buying securities in front of the Fed, and selling them to the Fed at a premium, allowing him to profit handsomely. Gross runs PIMCO’s $252.2 billion Total Return Fund.
Morgan Stanley sold the Fed more than $205 billion in mortgage securities from January 2009 to July 2010, while it’s much bigger rival, Goldman Sachs, sold $159 billion. Citigroup, the nation’s third-largest bank by assets, sold the Fed nearly $185 billion in mortgage bonds. Merrill Lynch/Bank of America sold about $174 billion.
It’s not clear how much these firms profited by engaging in the kind of activity that allowed Gross to profit so well, known as “front running.” However, it’s abundantly clear that they did turn a profit.
— Having trouble sorting out the alphabet soup of programs in the Federal Reserve’s big info release today?
The Wall Street Journal has a helpful glossary so you can separate the TALF from the TAF.
And it’s good to note these (emphasis mine):
While some of the programs have been wound down as the health of financial markets improved, the Fed still holds most of the assets it took on during the crisis. As of Nov. 17, the Fed had $2.3 trillion in assets.Federal officials didn’t disclose which financial institutions turned to the Fed’s traditional discount window during the financial crisis.
The latter will presumably be forced by Bloomberg’s suit.
— David Weidner gets some zingers in on Twitter today, playing off Jamie Dimon’s and Lloyd Blankfein’s insistence that they never needed taxpayer bailouts, and indeed suffered from them.
Here was press favorite Dimon dissing TARP (emphasis mine):
“For JP Morgan Chase, it was not a question of access or need-to the extent we needed it, the markets were always open to us-but the program did save us money,’’ Dimon said. J.P. Morgan stopped using the guarantees in April 2009 because “it just added to the argument that all banks had been bailed out and fueled the anger directed toward banks.”
Here’s Weidner on JPMorgan today:
How long until Jamie Dimon says $JPM went to TAF 7 times because of regulatory pressure.
And Goldman’s honchos memorably told Vanity Fair’s Bethany McLean this:
When I ask Gary Cohn, Goldman’s chief operating officer, and David Viniar, the firm’s chief financial officer, if, barring a financial Armageddon, Goldman would have survived without all the various forms of government intervention, Viniar says, “Yes!” almost before I can finish the question. “I think we would not have failed,” says Cohn. “We had cash.”
Even though it was in great shape $GS still needed $600B from the Fed’s emergency loan progam. http://on.wsj.com/e4FJCd
Nice.
I don't see any problem with JP Morgan and Goldman's stances. They were clearly not on the verge of failure and merely took advantage of cheap money from the Fed. They'd have been foolish not to.
For example, Goldman had something like $100bn in cash and liquid securities at hand back at the end of 2008. Do you really think a little matter like $13bn or so owed to them by AIG would have brought them down?
#1 Posted by Fred Finance, CJR on Wed 1 Dec 2010 at 10:48 PM
JP Morgan probably could have survived because they had less positions in the MBS market than most, though the collapse of the whole market would have sucked them down too as people ripped out their money from the dying system.
Goldman Sachs was also positioned well since they had their people in the government give them 100 cents on the dollar on their AIG CDS's.
Neither of these jag offs would have survived if the government hadn't bailed out their system and bought billions of assets off their books and given them loans at 0% interest so they could buy treasury securities at 2% etc...
And yet they feel like a pinata. Obama's "anti-business". Poor rich people.
http://economix.blogs.nytimes.com/2010/11/23/visualizing-booming-profits/
Ungrateful sociopathic jerks.
And this fellow is one of the worst of the lot.
http://neptune.observer.com/2010/wall-street/jack-welch-450-million-consumer-protection-too-expensive
"He has to create jobs! Not handouts, jobs!" Neutron Jack telling Obama how to create jobs, that's rich.
"Handouts are bad."
"Yeah and include the bank bailouts and..."
"No no I support those handouts at that moment. We were going to lose the world and George Bush was right and ahsdjkfhdlk"
Sorry. I accidentally threw up on my keyboard. These are the people running the world folks. They want everything for themselves and nothing for you. Tax cuts for themselves and social security cuts for you. A government securitized financial system for themselves and no handouts for you. A large, rule bending, no accountability government for themselves and a small, rule changing, debts enforcing for life government for you.
Eric Cantona is right. Pull your money out of the banks and let them get what's coming to them, because otherwise they will take everything from you.
#2 Posted by Thimbles, CJR on Wed 1 Dec 2010 at 10:56 PM
Mortgage refinancing means re-funding the mortgage loan with better terms as well as conditions, most likely from a different lender. It is one way to save money. Search online for "123 Mortgage Refinance" they found me 3.1% refinance rate and also gave free analysis of my mortgage.
#3 Posted by irmajarrell, CJR on Thu 2 Dec 2010 at 12:16 AM
Okay, make this make sense.
These are banks selling mortgage backed securities to the Fed. Are these the toxic assets that are presumably worth pennies on the dollar?
Is there a reliable estimate of money paid vs. money lost?
$1.7 trillion paid out to banks - what is the value of what the Fed is now holding?
#4 Posted by murph, CJR on Thu 2 Dec 2010 at 12:26 AM
Let's not confuse things. The only program I could see linked above that worked with MBS's was the TALF, which offered the banks non-course loans (the lender is on the hook, not the borrower) using pennies on the dollar MBS's as collateral.
The Fed asset purchase program ended in January and purchased about a trillion and a bit off the banks balance sheets for the non-market price of the securities (banks set their own imaginary price)
http://online.wsj.com/article/SB126291088200220743.html
Meanwhile, Freddy and Fannie are trying to throw back the hot potatoes that were dumped on them by JP Morgan and others because the dog ate their promissory notes (read foreclosure crisis)
http://www.bloomberg.com/news/2010-11-30/banks-in-u-s-resisting-calls-to-repurchase-fannie-mae-freddie-mac-loans.html
I'll post a better link in the post below but the above is a better layman's read.
#5 Posted by Thimbles, CJR on Thu 2 Dec 2010 at 01:07 AM
A better link:
http://online.wsj.com/article/SB10001424052702304011604575564631414300418.html
"While Fannie and Freddie don't make loans directly, they support housing markets by buying mortgages from banks and then selling them to investors as securities, providing guarantees. But during the housing boom, Fannie and Freddie augmented their role in the housing market by purchasing privately issued securities as investments. They became two of the largest investors in those bonds.
Those securities were often backed by subprime loans and mortgages that required little or no documentation of borrower incomes, which deteriorated sharply once home prices fell. Fannie and Freddie couldn't purchase those loans directly, but they were allowed to invest in slices of the securities that carried triple-A ratings.
Fannie and Freddie purchased $227 billion of bonds backed by subprime and other risky loans in 2006 and 2007. The value of those securities plunged as the housing boom turned to bust, and losses have accounted for around 9% of the firms' capital hole. So far, the government has injected $148 billion to keep the mortgage giants afloat."
"If the FHFA is successful in proving that loan files didn't meet underwriting standards or that their ownership chain wasn't properly transferred during the securitization process, that could pave the way for other investors to make similar challenges, said Joshua Rosner of investment-research firm Graham Fisher & Co."
And yeah, this is what was bought from them.
http://www.nytimes.com/2010/06/20/business/20foreclose.html
"Fannie Mae and Freddie Mac took over a foreclosed home roughly every 90 seconds during the first three months of the year. They owned 163,828 houses at the end of March, a virtual city with more houses than Seattle. The mortgage finance companies, created by Congress to help Americans buy homes, have become two of the nation’s largest landlords."
#6 Posted by Thimbles, CJR on Thu 2 Dec 2010 at 01:24 AM
___________________________________________
Attention! BankRun 2010:
BankRun 2010 est un retraits d'espèces de masse auprès des banques qui se produira le 7 Décembre 7 il est initié par l'ancien joueur de football Eric Cantona. Il est organisé sur Internet par un réseau d'événements Facebook et a attiré l'attention des médias
J'ai pensé que beaucoup d'autres que ce mouvement été spontané et naïf et j'ai pensé que je pourrais m'y accrocher afin d'établir La Nouvelle Économie. Après une discussion sur Skype avec Géraldine Feuillien j'en suis venu à la conclusion que c'était un mouvement dont le cerveau manipulateur est encore inconnu, mais dont le but est d'établir un système économique sans doute fasciste qui apparaîtra par la terreur plutôt que d'un mouvement qui va favoriser les intérêts économiques des chacun d'entre nous.
La page de notre communauté contient des instructions concernant les mesures à prendre avant le 7 Décembre pour préserver vos économies.
La Nouvelle Économie.
http://post-crash.com/fa/attention/
___________________________________________
#7 Posted by V07768198309, CJR on Thu 2 Dec 2010 at 08:02 AM
What the hell..
http://www.mcclatchydc.com/2010/12/01/104568/fed-wants-to-strip-a-key-protection.html
"As Americans continue to lose their homes in record numbers, the Federal Reserve is considering making it much harder for homeowners to stop foreclosures and escape predatory home loans with onerous terms.
The Fed's proposal to amend a 42-year-old provision of the federal Truth in Lending Act has angered labor, civil rights and consumer advocacy groups along with a slew of foreclosure defense attorneys.
They're not only asking the Fed to withdraw the proposal, they also want any future changes to the law to be handled by the new Consumer Financial Protection Bureau, which begins its work next year.
In a letter to the Fed's Board of Governors, dozens of groups that oppose the measure, including the National Consumer Law Center, the NAACP and the Service Employees International Union, say the proposal is bad medicine at the wrong time.
"At the depths of the worst foreclosure crisis since the Great Depression, we are surprised that the Fed has proposed rules that would eviscerate the primary protection homeowners currently have to escape abusive loans and avoid foreclosure: the extended right of rescission."...
Since 1968, the Truth in Lending Act has given homeowners the right to cancel, or rescind illegal loans for up to three years after the transaction was completed if the buyer wasn't provided with proper disclosures at the time of closing.
Attorneys at AARP have used the rescission clause for decades to protect older homeowners stuck in predatory loans with costly terms. The provision is also helping struggling homeowners to fight a wave of foreclosure cases in which faulty and sometimes-fraudulent disclosures were used...
Critics say the proposed change by the Fed would render the rescission clause useless. The Fed proposal would require homeowners who seek a loan rescission through the courts, to pay off the entire loan balance before the lender cancels the lien.
"This, of course, would be almost impossible for most consumers to do because they can't come up with the money until they get out of the loan. And they can't get out of the loan until the lien is released," said Barry Zigas, director of housing and credit policy at the Consumer Federation of America. "None of us are quite sure what purpose is being served by this proposal or what prompted it."
Requiring homeowners to pay what remains of the original loan before a rescission can proceed is tantamount to a "verdict first, trial later" philosophy, Keest said."
Nobody at the Fed seems to care about consumers. They care only about corrupt big bankers. Not enough to regulate them or hold them accountable for fraud, just enough to keep their precious black little hearts spoiled happy.
And it's not hard to see why.
http://www.ft.com/cms/s/0/50060170-fda9-11df-9ea5-00144feab49a.html
#8 Posted by Thimbles, CJR on Thu 2 Dec 2010 at 09:28 AM
There's a lot of information, but you have to clarify the difference in the programs and I haven't seen anyone do it right. It’s implied in the Pro Publica data base because they only report 3 of the 9 facilities, but still are missing two of the important ones.
The first group should be though of as “institution liquidity facilities,” like TAF that was created to help troubled institutions that didn't want to be seen going to or didn't have access to the Discount window. This and other “institution liquidity” programs were focused at other types of borrowers and products like commercial companies in the CPFF (think McDonalds), PDCF (Primary Dealers—those who create the markets for Treasuries), TSLF (MBS), MMIFF (money market funds) who either don’t have a lender of last resort or the market collapsed in the wake of Paulson letting Lehman fail.
The other type should be thought of as a “market liquidity facilities,” like TALF, which was a program to stimulate process in "Troubled Assets" thus gave loans and also took equity stakes along side people like Mr. Gross.
Not to spoil the voyeuristic fun here of poking at those who seemingly got out of the crisis unscathed or unrepentant, but there are some interesting points in here and the big users of the “institution liquidity” should be interpreted as a signal of weakness and dependence on the taxpayer.
Andrew Sullivan did point out (though I think not understanding the difference in programs) that Cit BofA and Merrill Lynch were the largest beneficiaries according to the Pro Publica data, but that also mirrored public guarantees and interventions from the Treasury, so maybe not a lot of new information of their weakness at the time.
What may be interesting are the less public participants and any insights into statements they made about their financial stability at the time. Also, I wonder whether institutions should consider their ability to seek a liquidity backstop without disclosure to investors, creditors or the public is now eroded or eliminated and how that might affect either their ability or willingness to seek help in a future crisis.
#9 Posted by David E., CJR on Thu 2 Dec 2010 at 01:02 PM