The Fed Does It Again: $80 Billion Secretive "Bank Subsidy" Program Uncovered, Providing Bank Loans At 0.01% Interest

Tyler Durden's picture

The Fed does it again. Following consistent allegations that the Federal Reserve operates in an opaque world, whose each and every action has only had a purpose of serving its Wall Street masters, led to repeated lawsuits which went so far as to get the Chairsatan to promise he would be more transparent, Bloomberg's Bob Ivry breaks news that between March and December 2008 the Fed operated a previously undisclosed lending program, whose terms were nothing short of a subsidy to banks. Says Ivry: "The $80 billion initiative, called single-tranche open- market
, or ST OMO, made 28-day loans from March through December
2008, a period in which confidence in global credit markets collapsed
after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. Units of 20 banks were required to bid at auctions for the cash. They
paid interest rates as low as 0.01 percent that December, when the Fed’s
main lending facility charged 0.5 percent
." 0.01% interest is also known by one other name: "outright subsidy." It doesn't get any freer than that: 0.01% interest on one month cash. Just how close to a complete implosion was the financial system if 0.5% interest seemed too high? Not surprisingly, this program was widely used: "Credit Suisse Group AG, Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public...Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein,
tapped the program most in December 2008, when data on the New York Fed
website show the loans were least expensive. The lowest winning
bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New
York Fed data show. At the time, the rate charged at the discount
window was 0.5 percent
."  Yes, that Goldman Sachs. The same one that perjured itself when it said before the FCIC that it only used de minimis emergency borrowings. Just how many more top secret taxpayer subsidies will emerge were being used by the Fed to keep the kleptocratic status quo in charge?

From Buisnessweek:

“This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”

Congress overlooked ST OMO when lawmakers required the central bank to publish its emergency lending data last year under the Dodd-Frank law.

“I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.

 Records of the 2008 lending, released in March under court orders, show how the central bank adapted an existing tool for adjusting the U.S. money supply into an emergency source of cash. Zurich-based Credit Suisse borrowed as much as $45 billion, according to bar graphs that appear on 27 of 29,000 pages the central bank provided to media organizations that sued the Fed Board of Governors for public disclosure.

New York-based Goldman Sachs’s borrowing peaked at about $30 billion, the records show, as did the program’s loans to RBS, based in Edinburgh. Deutsche Bank AG, Barclays Plc and UBS AG each borrowed at least $15 billion, according to the graphs, which reflect deals made by 12 of the 20 eligible banks during the last four months of 2008.

And even now, we don't know how much these individual subsidies were:

The records don’t provide exact loan amounts for each bank. Smith, the
New York Fed spokesman, would not disclose those details. Amounts cited
in this article are estimates based on the graphs.

The usual excuse is used: the purpose of the program was to prevent the Ice-6ing of shadow markets

One effect of the program was to spur trading in mortgage- backed securities, said Lou Crandall, chief U.S. economist at Jersey City, New Jersey-based Wrightson ICAP LLC, a research company specializing in Fed operations. The 20 banks -- previously designated as primary dealers to trade government securities directly with the New York Fed -- posted mortgage securities guaranteed by government-sponsored enterprises such as Fannie Mae or Freddie Mac in exchange for the Fed’s cash.

ST OMO aimed to thaw a frozen short-term funding market and not necessarily to aid individual banks, Crandall said. Still, primary dealers earned spreads by using the program to help customers, such as hedge funds, finance their mortgage securities, he said.

One name stands out: Goldman Sachs.

 The New York Fed conducted 44 ST OMO auctions, from March through December 2008, according to its website. Banks bid the interest rate they were willing to pay for the loans, which had terms of 28 days. That was an expansion of longstanding open- market operations, which offered cash for up to two weeks.

Outstanding ST OMO loans from April 2008 to January 2009 stayed at $80 billion. The average loan amount during that time was $19.4 billion, more than three times the average for the 7 1/2 years prior, according to New York Fed data. By comparison, borrowing from the Fed’s discount window, its main lending program for banks since 1914, peaked at $113.7 billion in October 2008, Fed data show.

Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, tapped the program most in December 2008, when data on the New York Fed website show the loans were least expensive. The lowest winning bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New York Fed data show. At the time, the rate charged at the discount window was 0.5 percent.

More on Goldman:

As its ST OMO loans peaked in December 2008, Goldman Sachs’s borrowing
from other Fed facilities topped out at $43.5 billion, the 15th highest
peak of all banks assisted by the Fed, according to data compiled by
Bloomberg. That month, the bank’s Fixed Income, Currencies and
Commodities trading unit lost $320 million, according to a May 6, 2009,
regulatory filing.

The source of the data: a FOIA lawsuit, just because the plebs knowing where billions of their money goes is not really in the best interests of the lords.

The bar charts were included in the Fed’s court-ordered March 31
disclosure under the Freedom of Information Act. The release was
mandated after the U.S. Supreme Court rejected an industry group’s
attempt to block it

So there it is again: a secret bailout program used to "rape" the peasantry by the entitled kleptocrats, which nobody thought would be exposed, and would allow those in control to lie blatantly to Congress. But have no fear: the wheels of justice are turning: instead of having those who rape millions under house arrest, we get the spectacle of those who allegedly rape one. The former, after all, are just a statistic.

And how long before the peasantry just snaps from the barage of endless lies?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
HamyWanger's picture

The Pigmen will always bend the rules and screw the little guy.

Learn it, love it, trade it. 

augie's picture


GolfHatesMe's picture

Fuck it, tatoo it on your forehead, Lebowski.

unwashedmass's picture

Lloyd lied....outright, blatantly, bold-faced lied to Congress.

Not that it matters for someone like him.

Harlequin001's picture

Where are the whistle blowers?

Slash's picture

wouldn't this be in the time frame when the squid wanted to go private?


perhaps with free money from their privately owned central bank?



JW n FL's picture
by Harlequin001
on Thu, 05/26/2011 - 09:07


Where are the whistle blowers?



Secret Hold On Whistleblower Protection Narrowed Down To Two Senators



UBS Whistle Blower in Jail for helping the IRS with over 2,000 Tax Dodgers!  


'Austrian tax evasion whistleblower' dies in Swiss jail


Swiss tax whistleblower to give WikiLeaks new data & in Jail for it  


No Bankers in Jail, No Tax Dodgers in Jail and Wall Street is Leveraged MORE than before! Tell the Truth? Go To Jail!

Top U.S. Lobbying Banks Got Biggest Bailouts


RockyRacoon's picture

Would that total be 2, 3, or 6?

LawsofPhysics's picture

Love it.  "where is the fucking money Labowski?"

Long brass, lead, and gunpowder for sure.

plocequ1's picture

Exactly. Fuck it. Life is short. Live your life, Worship God, Love people and BTFD.

writingsonthewall's picture

"no revenue will be left to pay for other government spending, including constitutional functions such as defense."

...and you think that's a bad thing?


Oh dear, some people never learn - stil prefer to invest in bombs, weapons and destruction than ensuring your fellow man is fit and able to work.

You are destined to a life of disappointment I'm afraid - the word 'entitlements' is there for a reason - people are 'entitled' to receive their surplus labour value back in the form of medicare and other benefits - as opposed to handing it to the wealthiest in society as tax cuts (or in this case sheer subsidy)

Is it you feel that people who work for a living are not entitled to benefits - but those who gamble are?

writingsonthewall's picture

You won't solve the problem by ignoring it - that has been the lesson until now.

Thisson's picture

Those entitlements are theft, plain and simple.

The people drawing them didn't contribute the fair value of what they take in return.  Instead, they loot MY paycheck, making it harder for me to provide for my own loved ones.  I wish we would just cut social security and medicaid off completely so the leaches would die.

Robslob's picture

SCOTUS found in contempt of the American People....GUILTY!

unununium's picture


"The release was mandated after the U.S. Supreme Court rejected an industry group’s attempt to block it"

unwashedmass's picture


yeah, i know. i was surprised too. do the supremes want more cash under the table?

the not so mighty maximiza's picture

The Federal Reserve act did not cover this.   

oogs66's picture

Now Goldman can plead, we didn't borrow at the Fed Window, we borrowed from the Fed at their super secret save the banks lending program.  You should have asked about that program and of course we would have said they borrowed there. 

unununium's picture

Problem is, they did both. Bzzzzzz. Thanks for playing.

Urban Redneck's picture

That's why bankers never testify without any army of lawyers sitting behind them.

RockyRacoon's picture

Now Goldman can plead, we didn't borrow at the Fed Window...

That's one broken window even Bastiat could love.

youngman's picture

Its is us vs them....and them are winning..and laughing....what a joke....some of the quotes make me want to puke....

augie's picture

"The records don’t provide exact loan amounts for each bank. Smith, the New York Fed spokesman, would not disclose those details. Amounts cited in this article are estimates based on the graphs"

hugovanderbubble's picture

Awesome how in the US no Demos against banksters:¡

doomandbloom's picture

The idiots at Stone(d) Street...will probably come out with a justification..

Troy Ounce's picture


Got also pretty upset by the entitlement thinking of these money nerds

emsolý's picture

Isn't that what the consumer gets at BestBuy, GM etc? 0% financing for a little while...

augie's picture

So if i pray to this St. Omo guy do i get a bailout?

hedgeless_horseman's picture

You will need to fill out a pledge card.

10% is the recommended tithe.

They will be watching when the collection plate passes through your pew.

Quinvarius's picture

I am sure none of these programs ever ended.  The may have changed names or become an insiders secret society Sams Club of money.  But, the spice must flow.

cowdiddly's picture

I thought it was Ice-nine, if you are refering to that stuff that freezes all the water on the planet so that Marines don't have to wade in mud.

Tyler Durden's picture

You are correct. And it is an inversion inside joke.

jkruffin's picture

Too bad all our prosecutors suck ass, or we could rid ourselves of Goldman once and for all, and Benny Boy.  But alas, they are are paid off and playing gold everyday with taxpayer funds.

Anonymouse's picture

According to my senator, 1) the Fed already is thoroughly audited, 2) more audits would mean political interference and would "disrupt financial markets", and 3) she already supported more audits.  She actually managed to speak out of all 3 sides of her mouth at once.

Dear Friend,

Thank you for contacting me regarding an audit of the Federal Reserve. I appreciate hearing your thoughts on this important issue. I apologize for my delayed response.

The Federal Reserve does currently undergo what would be considered a standard audit -- an examination of accounts and records. Furthermore, Congress already reviews semi-annual reports on monetary policy submitted by the Federal Reserve Board of Governors, as required under the Full Employment and Balanced Growth Act (PL 95-523). Under the Federal Banking Agency Audit Act (PL 95-320), the Government Accountability Office (GAO) has the authority to conduct financial and performance audits of the Board of Governors and the Federal Reserve banks and branches. However, such audits are limited, as the law stipulates that monetary policy operations, foreign transactions, and Federal Open Market Committee operations are excluded from the scope of the GAO audits.

An audit of the Federal Reserve System is an issue that has been debated several times since I began serving in the United States Senate, most recently during the 111th Congress when the U.S. Senate addressed financial regulatory reform. All Federal Reserve audit legislation proposed in the 111th Congress called for increased oversight by the Government Accountability Office (GAO) into business conducted by the Federal Reserve.

On January 26, 2011, the Federal Reserve Transparency Act of 2011 (S. 202/H.R. 459) was introduced in the Senate and referred to the Committee on Banking, Housing and Urban Affairs. The bill instructs the Comptroller General of the United States to conduct an audit of the Federal Reserve System's Board of Governors and also the Federal Reserve banks before 2013.

The formulation of monetary policy is a decision-making process that involves information gathering from a host of foreign governments and central banks. The information provided from those exchanges is critical and extremely sensitive. The immediate and broad disclosure that the Federal Reserve Transparency Act of 2011 requires could disrupt financial markets and jeopardize our country's international finance relationships. Ultimately, it would be taxpayers who would bear the brunt of any losses resulting from policies caused by untimely disclosure of sensitive information. Because of this, I do not believe the benefits of legislation like the Federal Reserve Transparency Act of 2011 outweigh the costs.

When Congress passed the Federal Banking Agency Audit Act in 1978, the legislation attempted to balance the need for public accountability of the Federal Reserve with the need to insulate the Fed's monetary policy function from political pressures. I believe this balance must be maintained going forward. For that reason, I twice supported amendments during the 111th Congress that would have required one-time audits of the Federal Reserve System's actions in response to the financial crisis. Both amendments struck a balance between accountability to the American taxpayer and the denial of political pressure and influence on the Federal Reserve System. The result would have been increased insight and reassurance for the American people that the Federal Reserve is working in the best interest of taxpayers to strengthen and protect our financial system.

Again, thank you for contacting my office. It is truly an honor to represent North Carolina in the United States Senate, and I hope you will not hesitate to contact me in the future should you have any further questions or concerns.


Kay R. Hagan

Medea's picture

Don't waste your time with elected officials. They are nothing more than the facade of the establishment.

unununium's picture

Does that include Alan Grayson, Marci Kaptur, and Ron Paul?

Phil Dupterjaw's picture

Alan Grayson is no longer an "elected offical."

Zedge Hero's picture

There is a Senator out there who is for media freedom, acknowledges Global Warming, against our trade policies with China, against the Iraq War from the begining, and introduced a bill to audit the federal reserve.  Bernie Sanders for President right? 

Nope he's not running and if I ever told you as a hard core Republican that I would vote for a Jewish Socialist i would have laughed at you.  Then again 3 years ago if you were to tell me that I would have a 2 acre garden, a safe with silver, gold, and lead along with an array guns preparing for dieoff I would have told you your crazy and I am no damn tinfoil nut.  Things change quickly when you educate yourself outside the MSM alphabet networks.  Sometimes I feel so fucking stupid for the old wants and failing to realize my future needs.   Better late than never.  Good Luck!

augie's picture

 "It would be ultimately the tax payer who would bear the brunt of any lossess resulting from polices caused by untimely disclosure of sensitive information."

I love how people still believe America is a free society.

stormsailor's picture

perhaps you should create her a forth side of her mouth from which to speak.

earnyermoney's picture

Kay Hagan is a Wall Street ho. She's got the back of her former colleagues at BAC. Have to wait 2 more years to vote this fascist shill out of office.

emsolý's picture

Remember, Goldman Sachs became a bank holding only end of Sep '08!

So they had some catching up to do in December...


HamyWanger's picture

As me, Leo Kolivakis and Robot always repeated, nothing will ever change. 

The American public doesn't care. Deal with it.