Bloomberg have released a Christmas cracker for investors this morning, under the USA Freedom of Information Act they’ve obtained the detail on the loans made to the banks and various financial institutions from when the banking system began to implode in 2008-2009. I’ve provided a link to the main body of the information, but it’s worth concentrating on a few of the salient numbers in order to get a feel for the size and scope of the support.
Just how deep the rabbit hole went is truly breath-taking and terrifying in equal amounts. When you consider the ‘headline’ figure for USA unemployment is still at a stubborn 9%, GDP growth at 1.8%, the debt ceiling months away from busting through it’s revised circa $17 trillion level, there are 46 million USA citizens on the food stamps programme, 1.6 million homeless and States and cities are bankrupt you do begin to wonder what’s actually been achieved (since 2008) with this gargantuan support package?
Has a banking system stabilisation been worth this level of debt and support, when the citizens of the country are worse off? The counter argument is that we (apparently) have no idea how much worse the economy and as a consequence individual lives would have been had the USA govt. and the Fed not stepped in. However, the rebuttal to that counter argument is that the USA would now be over the worse and the rest of the global banking system, in Europe and the USA, might not lie in ruins. Three-four years on, cleansed of the financial virus after a healthy purge, collectively we, as global citizens, may have been experiencing a brighter dawn and a far brighter future had the ‘too big to fails” been allowed to fail..
Bloomberg has this morning released spreadsheets showing the daily borrowing totals for the 407 banks and companies that tapped Federal Reserve emergency programs during the 2007 to 2009 financial crisis.
Bloomberg News obtained the information on the ‘discount window’ and ST OMO (short for single-tranche open-market operations) through the Freedom of Information Act. The Fed rejected the request, Bloomberg LP then filed a federal lawsuit to force disclosure and won the case. In March 2011, the U.S. Supreme Court chose not to intervene and the Fed released more than 29,000 pages of transaction data.
- $1.2 trillion – The Fed’s actual lending to banks and financial companies at its single-day peak, Dec. 5, 2008, through the seven programs Bloomberg News studied in depth.
- $1.5 trillion – The Fed’s own number to represent its peak lending. This included foreign-currency liquidity swaps. Under the swap lines, the Fed lends dollars to foreign central banks, which in turn lend the money to local banks. Only the names of central banks involved in the transactions have been made public.
- $7.77 trillion – The amount the Fed pledged to rescue the financial industry. This number represents potential commitments, not money out the door, was first published in March 2009, when it peaked.
- $6.8 trillion – The potential amount the Fed might have lent if “all eligible program applicants request assistance at once to the maximum permitted under the program guidelines,” according to a July 21, 2009, report by the Treasury Department’s Special Inspector General for the Troubled Asset Relief Program, or TARP.
- $16 trillion – The “total transaction amounts” for Fed lending included in a July 21, 2011, study by the Government Accountability Office. The Fed’s Dec. 6 memo said it was inaccurate to describe that amount as the total of its lending and guarantees.
- $1.14 trillion – A different total for Fed lending that the GAO included in the same July 21, 2011, report. The GAO accounted for differences in loan terms by multiplying each loan amount by the number of days the loan was outstanding and then dividing by the number of days in a year. Bloomberg’s figure represents peak lending on a single day.
Are we any clearer on what the rescue total is/was, how much the USA tax payer is on the hook for, how much of the rescue fund has been ‘burnt’ through, how much ‘ammo’ the Fed has left? Well it’s no longer as clear as mud and doubtless the more iconoclastic publications within our forex community will dissect, analyse and opine on the info. but for now Bloomberg’s tenacity, which should be applauded, has provided some seriously chewy ‘meat on the bone’ that’ll take some time to digest..