Fed audit shows $16 TRILLION in secret loans to banks around the world
By Ken Falkenstein | Tuesday, August 9th, 2011 | Policy
Yes, you read that right. The Government Accounting Office completed an audit of the Federal Reserve Board and released a report on July 21, 2011, that revealed that the Fed has made secret loans totaling $16 trillion to banks both in the United States and around the world.
To put that in perspective, last year, the gross domestic product of the entire U.S. economy was $14.5 trillion.
Furthermore, the biggest Fed loans were made to those institutions who were most culpable for the economic crisis of 2008.
Put aside how appalling this is. The first question that comes to my mind is WHERE ARE THE NEWS MEDIA?????
An unaccountable government entity took $16 trillion of money from the American people and secretly gave it to banks that have already proven themselves to be untrustworthy. Included in this $16 trillion was $3 trillion in interest-free “loans” to foreign financial institutions in the U.K., Germany, Switzerland, France and Belgium that have not been repaid. And the Fed took this covert action with our money at a time that Americans were losing their jobs by the millions.
Yet in the three weeks since the GAO issued its report a Google search reveals that none of the major American news media found this story to be newsworthy!
Want to know who broke this news? Bernie Sanders. Yes, that Bernie Sanders – the self-avowed socialist from Vermont.
You know America is in trouble when the nation’s only (admitted) socialist senator is more reliable in exposing government waste on a massive scale than our supposedly “mainstream” media.
You can read the GAO report for yourself here.
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About the author
Ken Falkenstein has been a staffer in the United States Senate and the Virginia House of Delegates. He has managed political campaigns. He was a military intelligence analyst in the U.S. Army in West Germany during the Cold War. He is currently the Vice President of the Down Syndrome Association of Hampton Roads and practices as a civil litigation attorney with the law firm of Poole Mahoney PC in Virginia Beach. His concern for his kids' future is what most informs his writing.
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13 Responses to "Fed audit shows $16 TRILLION in secret loans to banks around the world"
KF,
There were news stories starting around Dec 2010 on the secret loans to domestic and foreign banks although the total dollar amount was not widely disseminated (see below for example). I agree that the news media is not about to make Ron Paul look good on his criticisms of the Fed Reserve. I hope most of the loans were repaid otherwise we have a $30 trilion current debt. Of course the joke may be on the recipients in the future if Bernanke keeps handing them US dollars.
http://www.bloomberg.com/news/2011-04-01/foreign-banks-tapped-fed-s-lifeline-most-as-bernanke-kept-borrowers-secret.html
No wonder our credit rating slipped with this and other things you haven’t covered here. Too bad the average voter, who actually makes the difference in the elections, usually doesn’t pay attention to what’s really going on. The candidate who faces Obama can’t be the slogan king that failed, but will have to bring facts to the America that knows how to pull their sleeves up, get to work together to make a difference for the future of their America that they love. No more slogans just facts (we are already living with it) and a clear cut plan to steer us to our county being the light on a shining hill once again.
Love the graphic…
Really does show Paul knows what he’s talking about on this, and the last thing the left (and much of the right) wants is for him to look credible.
Shhh! You aren’t supposed to know that.
BTW, welcome to the party. If you read Zero Hedge daily you would have known this the day the report was released. I guess only us kooks are regular readers.
Next up, California rents metal detectors to search for lost coins to pay their brand spanking new negotiated budget shortfall when revenue figures came in below estimates.
Or how about “Fed turns into Tea Party!”
I guess I am not the swiftest boat in the lake, because I am baffled at how this could be. They printed an additional $16 trillion in 3 years and it didn’t cause a high inflation rate? If that is the case then why not print another $16 trillion and pay off the debt? Are we just having a delayed effect since so much money is being held by corporations and banks? I knew I should have taken more courses in economics.
“They printed an additional $16 trillion in 3 years and it didn’t cause a high inflation rate?”
Of course it didn’t cause inflation. No one knew there was $16 Trillion out there so it wasn’t included in the PCI data that was bogus anyway. It’s kinda like all those people that don’t look for work because there’s no jobs are not counted against unemployment. Or the 99 weekers that fall off the end of their checks are considered a positive employment event.
The only reason gold or food is at an all time high is because Bernie spilled the beans and Farm Fresh hiked prices to account for the clean up.
Thank you Darrell for that link
http://www.zerohedge.com/
JZ,
They aren’t printing $16 trillion in small unmarked bills. I assume these included totals of all kinds of short term loans, loans to shore up balance sheets at audit time, bridge loans, the usual sweetheart loans etc. I thought the total loss was less than $1 trillion at least in the first cycle. What the Fed Reserve loses in the next year remains to be seen. A lot of money is being printed to buy US bonds.
If the 16 trillion does not find it’s way into the economy it will not cause inflation. Printing a 100 trillion and putting it in a closet does nothing to the economy. Most of this cash is likely just backstopping losses from 2008 and preventing banks from collapsing. It is not being lent out though, so it has had no effect in the real economy, yet. Food and gold prices rising are likely due to hedging and speculation against the U.S. dollar, people dumping dollars in exchange for gold and food commodities. There is a good article that traces the recent food bubble to Goldman Sachs Commodity Index and describes how Goldman Sachs created the food crisis of 2007-2008. The article is called: How Goldman Sachs Created the Food Crisis – By Frederick Kaufman. Gold speculation is a flight from U.S. dollars due to monetary policy such as the secret lending by the Fed.
John, your post is riddled with misinformation, misconceptions, and very revealing B-school blather. Are you an MBA?
“If the 16 trillion does not find it’s way into the economy it will not cause inflation. Printing a 100 trillion and putting it in a closet does nothing to the economy.”
On the contrary, it wasn’t put into a closet. It was put into banks, where it prevented price signals from being sent accurately. Since a free market economy runs on price signals, the damage to the economy was devastating. A small board of wise men picked winners and losers. The market was thwarted. The damage done by interventions is incomprehensibly great. Political pull (bribery) counts for more than business smarts and hard work. The system is killed from within. The banks should have been allowed to collapse of their own stupidity and fraud.
“Most of this cash is likely just backstopping losses from 2008 and preventing banks from collapsing. It is not being lent out though, so it has had no effect in the real economy, yet.”
Again, false. Is the “cash” real? If it is real, then it must have an effect. As I noted above, it thwarted the transmission of price signals that are so essential to a functioning capitalist economy. As von Mises pointed out so eloquently in “Economic Calculation In The Socialist Commonwealth,” thwarting price signals destroys the decision making process and amplifies malinvestment to the point where the system collapses, just as ours is right now.
If the cash is not real, then it is merely an article of faith. Faith is no basis for an economic system. Faith in the government’s management of the economy is the exact thing that is cracking right now, right before our eyes. Soon we will have a federal department of economic faith.
“Food and gold prices rising are likely due to hedging and speculation against the U.S. dollar, people dumping dollars in exchange for gold and food commodities.”
And why are people doing that? Because anyone who has studied economic history knows what the end game of a fiat currency looks like. It looks just like the U.S. and the EU. Desperate to continue funding the welfare/warfare state, governments debase the currency, either by coin-clipping, diluting precious metal content, cranking up the printing press, or now just clicking “money” into the accounts of favored banks. The ROI on lobbying is 1,000-fold or more.
“There is a good article that traces the recent food bubble to Goldman Sachs Commodity Index and describes how Goldman Sachs created the food crisis of 2007-2008.”
Do you mean the current and ongoing food crisis? Have you been in a grocery store lately?
“Gold speculation is a flight from U.S. dollars due to monetary policy such as the secret lending by the Fed.”
Gold investment is capital flight, plain and simple. When capital sees the existing currency regime in the process of being destroyed, capital flees to a highly concentrated, liquid, and time-honored means for moving it from one currency regime to the next. It always has, and it always will. “Speculation” indeed.
Used to read The Myers Finance and Energy Newsletter back when Carter was in charge. C V Myers said “A DEBT WILL ALWAYS BE PAID — EITHER BY THE ONE WHO BORROWED, OR BY THE ONE WHO LENT” Put another way, every loan in the world will be paid either by the debtor or the lender himself, who unwittingly made the bad loan.
Jamie Jacoby
Are you looking for an argument where none exists? It certainly appears so. Libertarians are so insecure that it isn’t even funny, it is a little sad. Your “rebuttals” are against an example and statements which do not tell the whole story since I did not feel like writing a thesis here. Anyway you are going to have to find someone else to practice mental masturbation with. I will give you an example of what I mean, though, so you can extrapolate it out to your other “points”. The article is about the 2007-2008 food crisis that does not mean there is not one happening now. Your black/white viewpoint is clouding your ability to realize that an example or statement does not negate all other statements possible, especially when those other statements are not even contradictory to the original premise.
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