Audit Notes: The Federal Reserve’s Trillion-Dollar Bailout Document Dump

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.


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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , ,