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Thursday, September 6, 2012

The 29 Trillion dollar Private Equity swindle

The Fed claims that it gave the banks only a trillion dollars in bailout money.  We've all heard this number disputed by Bloomberg (7.6 trillion) and the General Accounting Office (16 trillion)  and many independent commentators.  Here's a breakdown of Fed charitable donation activity to the World's largest Banks since the crash of 2008.

The total charitable contributions made by the Fed totals 29 trillion dollars.  Maybe some of it has been paid back.  Maybe some of it was traded for securities with some value.  Who knows?  Only the Fed.  And they're not gonna say. 

What's sure is that while the politicians argue publicly over a few billion here and there, the single greatest transfer of wealth in the history of the world from the middle class to the banking class has just been perpetrated.

What's also certain is that the crisis that facilitated this massive transfer of wealth was engineered by the Fed (negative real rate policy starting in 1980 with Reagan and Greenspan) and the banks who sold every mortgage (facilitated by the negative rates) ten times over.   Not to mention trillions of dollars of Virtual Mortgages that had no underlying properties.

They loaded the economy with debt.  The economy went broke.  They extracted 29 trillion dollars of equity.  That puts Bain capital to shame.  Though it operates in exactly the same manner.

Table 1: Cumulative facility totals, in billions
Source: Federal Reserve
Facility Total Percent of total
Term Auction Facility $3,818.41 12.89%
Central Bank Liquidity Swaps 10,057.4(1.96) 33.96
Single Tranche Open Market Operation 855 2.89
Terms Securities Lending Facility and Term Options Program 2,005.7 6.77
Bear Stearns Bridge Loan 12.9 0.04
Maiden Lane I 28.82(12.98) 0.10
Primary Dealer Credit Facility 8,950.99 30.22
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility 217.45 0.73
Commercial Paper Funding Facility 737.07 2.49
Term Asset-Backed Securities Loan Facility 71.09(.794) 0.24
Agency Mortgage-Backed Security Purchase Program 1,850.14(849.26) 6.25
AIG Revolving Credit Facility 140.316 0.47
AIG Securities Borrowing Facility 802.316 2.71
Maiden Lane II 19.5(9.33) 0.07
Maiden Lane III 24.3(18.15) 0.08
AIA/ ALICO 25 0.08
Totals $29,616.4 100.0%

Source: “$29,000,000,000,000: A Detailed Look at the Fed’s Bail-out by Funding Facility and Recipient” by James Felkerson, forthcoming, Levy Economics Institute, based on data analysis conducted with Nicola Matthews for the Ford Foundation project “A Research And Policy Dialogue Project On Improving Governance Of The Government Safety Net In Financial Crisis”.

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