When the federal government declared the banking industry “too big to fail,” they weren’t exaggerating.† The amount of money provided to prop up these faltering institutions are only now coming to light, and a new report suggests that the amount of aid provided went far beyond what American taxpayers ever could have imagined.
According to Bloomberg News, a series of secret federal loans were made out to banks without disclosure, allowing many banks to pretend that they were not in any sort of real fiscal risk of failure.† Multiple lawmakers, including those who were in charge of finance committees within Congress, were completely unaware of the transactions, even as they themselves were trying to broker a deal for a financial bailout on their own.† In the end after trillions of dollars of bailout funding from Congress and secret federal reserve loans, the banking industry itself appears to have come out of the “crisis” having netted a full $13 billion in income.
“The Fed didnít tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day,” writes Bloomberg.† “Bankers didnít mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fedís below-market rates, Bloomberg Markets magazine reports in its January issue.”
How big were some of the handouts?† “[O]ne bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the countryís delinquent mortgages.”
How did the big banks spend some of their new largess?† Of course, executive bonuses and pay increases happened.† And there’s the money that was invested into lobbying against federal regulations on banks.
So when you struggle to pay your mortgage, remember that your bank likely received an undisclosed, secret loan for 0.01 percent, when you can’t even get a refi for 5 percent because your house is too underwater to qualify.
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