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Americans Have Been Bailing Out Foreign Banks for Years ... And We're Getting Ready To Do It Again
- AIG
- American International Group
- Bank of America
- Bank of America
- Bank of England
- Central Banks
- China
- Citigroup
- Counterparties
- Dubai
- European Central Bank
- Fail
- Federal Reserve
- Foreign Central Banks
- Grayson
- India
- International Monetary Fund
- Kucinich
- Swiss National Bank
- TARP
- Too Big To Fail
- Treasury Department
- Wall Street Journal
As the Wall Street Journal points out, the Federal Reserve might open up its "swap lines" again to bail out the Europeans:
The
Fed is considering whether to reopen a lending program put in place
during the financial crisis in which it shipped dollars overseas
through foreign central banks like the European Central Bank, Swiss National Bank and Bank of England.
The central banks, in turn, lent the dollars out to banks in their home
countries in need of dollar funding. It was aimed at preventing further
financial contagion.
The Fed has felt that it is premature to
reopen this program — which was shut down in February as the financial
crisis appeared to wane — because it wasn’t clear that foreign banks
were in need of dollar funds. Still, trading floors on Wall Street are
abuzz with anticipation today that the Fed might use the program again
as Europe’s problems take on a more global dimension.
***
The international lending lines are known among central bankers as swaps.
Fed
officials believe the swap program was one of its most successful
interventions aimed at stemming a global crisis, when many banks
overseas became strained for dollar funding. In their normal course of
business, they borrowed dollars in short-term lending markets and used
those dollars to finance holdings of long-term U.S. dollar assets, like
Treasury or mortgage bonds. When those markets dried up, the swap lines
helped to prevent overseas bank funding crises in 2008.Fed
officials see the swaps as a low-risk program, because its
counterparties in these loans are foreign central banks, and not
private banks. At a crescendo in the crisis in December 2008, the Fed
had shipped $583 billion overseas in the form of these swaps.
As the BBC's Robert Peston writes:
There
is talk of the ECB providing some kind of one year repo facility (where
government bonds are swapped for 12-month loans) in collaboration with
the US Federal Reserve.
See this for more information on swap lines.
Indeed, the Federal Reserve has been helping to bail out foreign central banks and private banks for years.
For example, $40 billion in bailout money given to AIG went to foreign banks. Indeed, even AIG's former chief said that the government used AIG "to funnel money to other Institutions, including foreign banks".
As the Telegraph wrote in September 2008:
The Fed has also just offered another $125bn of liquidity to banks outside the US that are desperate for dollars and can't access America's frozen credit markets.
Congressman Grayson said that the Fed secretly "stuffed" half a trillion dollars in foreign pockets.
(Of course, the Fed won't tell Congress or the TARP overseer - let alone the American people - who got the cash).
And as I pointed out the same month:
A Fact Sheet from the U.S. Treasury says:
Participating
financial institutions must have significant operations in the U.S.,
unless the Secretary makes a determination, in consultation with the
Chairman of the Federal Reserve, that broader eligibility is necessary
to effectively stabilize financial markets.An article from today in Politico explains
"In
a change from the original proposal sent to Capitol Hill, foreign-based
banks with big U.S. operations could qualify for the Treasury
Department’s mortgage bailout, according to the fine print of an
administration statement Saturday night."
Of course, even much of the bailout money which went to American banks ended up being shuttled abroad. As I wrote in March 2009:
Moreover, bailout money that went to Citigroup was loaned to Dubai, bailout money that went to Bank of America China was invested in China, and bailout money given to JP Morgan was invested in India.
And the government is in the process of providing billions more - along with trillions more in guarantees of worthless assets - to sovereign wealth funds and hedge funds.
So not only are Americans bailing out our own too big to fail banks, but we're bailing out foreign mega-banks as well.
Even though bailing out Europe might make sense if America was flush
with cash, things are different now. As Congressmen Kucinich and Filner
wrote last June:
Our country and this body cannot afford to spend American tax payer dollars to bail out private European banks.
In addition, the U.S. is - of course - also contributing tens of billions of dollars towards the Greek bailout through its contributions to the International Monetary Fund. Some allege that the U.S. will secretly help bailout of all of Europe. See this and this.
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Currency swap is not a bailout, it´s just that - a currency swap.
Where does Ben get the currency to swap?
yes...but explain this to me...aren't the currency swaps a bit like what Texas banks were doing before savings and loan crises...trading assets among themselves to make it look like their crap was worth something as someone paid good money for it, but these weren't arms length transactions?
sure a currency swap ii comes with a caviat .. a derivative that will insure the debt. but the big pockets is a taco stand in bangladesh which some one paid a premium to insure the wag runs off with the premium the banks short the debt.
this is the result
THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”
mises
Yeah, it is only a matter of time before this crises gets enough power unto itself to burst out of the closet. --The invisible elephant in the room will suddenly appear, and as it has grown quite angry over the decades that it has been ignored, it will have a hankering for vengance....
We don't need to audit the Fed. We already basically know what it does and how it does it. No? What we need to do is string em up by their toes.
One of the most shocking events in the beginning of this new century is the decrease in quality of propaganda.
Where is good propaganda?
Good propaganda leaves doubt, allows not to show a hand. It is not a call "show your beliefs in our drivel to prove your loyalty to us. You know we are lying and we know you know. Accept our lies and you will be accepted among us"
US American tax payer money? Absolutely not.
Putting side to side the vow of speaking the truth and a blatant and obvious lie is counter-productive to any propaganda.
The Nazis had it: their part of truth was their admission of propaganda. They had a minister of propaganda. They did not lie about spreading propaganda. This was the needed dose of truth any good propaganda requires.
Or, to paraphrase the old Soviet citizen line: They pretend to tell the truth and we pretend to believe them.
They pretend to pay us and we pretend to work.
US American tax payer money? Absolutely not.
Crap. Printing new money dilutes existing money. Who holds existing money? I do. It's my goddamned money, and they're taking it from me.
How is it crap?
How is dilution of money connected to tax payer money? Just sounds like a victimizer who wants absolutely to be painted as a victim.
Your deflection is so bad as to be silly. If I am a taxpayer who has money, and if pringint dilutes money, then printing dilutes my money and so it is theft of value from taxpayer money. Inflation is the ultimate form of theft.
That is your deflection, not mine.
What you underlined is valuable for any person holding one USD. Are US tax payers the only ones? Nope. So how comes they are through in?
Besides, I did not ask an assessment of your deflection but a connection between the very fact the bail outs are not funded by US tax payer money and dilution of money.
Still waiting, wont hold my breath because all you can deliver will be side tracking.
So when the value of the currency is destroyed, U.S. taxpayers are not harmed?
When the currency is destroyed, and the federal government can no longer borrow money for legitimate purposes without paying usurious interest rates (which of course must be paid by taxpayers), U.S. taxpayers are not harmed? It "isn't their money"?
Money isn't fungible? Is that what you're trying to say?
The point you are trying to make is semantic at best, and IMO is not even that.
If your point is that Federal Reserve Notes are not the property of U.S. citizens, and in fact are not money at all, then I agree. I'd gladly exchange them for U.S. currency known as "dollars" as defined in the Constitution if any were available and commonly circulating.
Semantic?
Laughable.
Not a point. An observation: the loans are not funded by US tax payer money. Not a semantic point.
You sidetracked on dilution of money for any cause you did not declare.
But even with that, US tax payers do not top the list, even though you put them first.
Who should be concerned at first by dilution of USD? Any people outside the US holding USD, with countries holding large reserves like China coming up first.
Because for the US tax payer in particular, dilution of money also means dilution of debt. And trying to assert that being stolen away from a debt harms is ridiculous.
As hard as you want it, it does not mean the US tax payer gets the short end of the stick.
The US tax payer does not fund the loans and money dilution is ambivalent.
So when the value of the currency is destroyed, U.S. taxpayers are not harmed?
When the currency is destroyed, and the federal government can no longer borrow money for legitimate purposes without paying usurious interest rates (which of course must be paid by taxpayers), U.S. taxpayers are not harmed? It "isn't their money"?
Money isn't fungible? Is that what you're trying to say?
SWR, it appears that there are a couple of posts here that may not even be legit. If they do not understand how currency inflation destroys currency value-then they are either sadly behind the curve or simply trying to interject some insidious ideology. in either case, they have found the wrong forum.
Facts are matter of ideology? Oh let me guess, you are part of that crowd who think that a guy who says there is a pen on a table when there is a pen on a table must forcefully belong to a ideological group to observe a pen on a table.
Was it about dilution of money? No. Dilution of money will affect any USD holder. Here we are talking about how the loans are US tax payer money. Stay focused.
Yes (to SWR). Oligarchy rule and all that comes with it is getting old (vast understatement). Did you know the word 'democracy' does not appear in either the Declaration of Independence or the US Constitution? Our founding fathers wanted a Republic.
Did you know that democracy is a political ideology and a republic a form of government?
Actually it's not YOUR money. Nothing on the FRN says it belongs to anyone but the FED.
They get our sweat for free and devalue that which we try to individually store up for a later day. If we had purchased gold and silver then we would have more securely squirreled away nuts for winter.
Von Mises is the most important extra credit assignment ever given to man (economically speaking). Too bad most don't want to put in the effort.
Feeling sore much America?
Nah, it's just more Pixeldust. It just disappears, all sparkly at first.
"Nothing to see here, move along."
Is the kind of pixledust you were referring to...?
http://www.nypost.com/p/pagesix/bedazzled_kathy_is_tickled_pink_Kul3qfff...
Ah, sprucing up the 'lady garden'.
http://www.obgyn.net/medical.asp?page=/english/pubs/jokes/hum_1026
What's that? I can't hear you over the protesters and banks on fire.