By Phil Mattera,
Dirt
Diggers Digest
Newly released transcripts of the 2009 meetings of the Federal Reserve’s open market committee show that monetary policymakers were still agonizing over whether they were doing enough to stabilize the teetering global financial system.
These documents
have a special interest for me because, as I discussed in last week’s Digest, my colleagues and I at Good
Jobs First recently collected a great deal of data about the Fed’s special
bailout programs in 2008 and 2009 as part of the extension of our Subsidy
Tracker database into
the federal realm. The Fed’s info is part of the more than 160,000 entries we
have amassed from 137 federal programs of various kinds. Subsidy Tracker 3.0
will go public on March 17.
In last week’s post I mentioned that the Fed programs involved the outlay of some $29 trillion (yes, trillion) and that the totals for several large banks (Bank of America, Citigroup, Morgan Stanley and JPMorgan Chase ) each exceeded $1 trillion. I pointed out that these totals referred to loan principal and did not reflect repayments (information on which is not readily available).
What I also
should have pointed out is that some of the Fed lending consisted of relatively
short-term loans that were often rolled over. In other words, the actual amount
outstanding at any given time was considerably lower than the eye-popping
trillion dollar figures.
That’s not to
say that the amounts were chicken feed. It’s safe to say that the loan totals
were in the hundreds of billions of dollars, and here again company-specific
amounts are not available.
This is still
high enough to justify the point I was making about the bailout amounts far
outstripping the sums these banks have been paying out in settlements with the
Justice Department to resolve allegations about investor deception in the sale
of what turned out to be toxic securities in the run-up to the financial
meltdown. And the amounts still justify anger at the current crusade by the big
banks to weaken the Dodd-Frank regulatory safeguards adopted by the same
government that bailed them out.
What is also
worth pointing out is that the bad actor-bailout recipients are not limited to
the big U.S. banks. Large totals also turn up for major European banks that
have been involved in their own legal scandals in recent years.
The biggest
foreign recipient of Fed support turns out to be Barclays, which has an
aggregate loan amount (including rollover loans and excluding repayments) of
more than $900 billion. Next is Royal Bank of Scotland with more than $600
billion and Credit Suisse with more than $500 billion.
In 2012 Barclays had to pay $450 million to U.S. and
European regulators to settle allegations that it manipulated the LIBOR interest
rate index. The following year Royal Bank of Scotland had to pay $612 million
to settle similar allegations.
In 2014 Credit
Suisse had to pay $2.6
billion in penalties to settle Justice Department charges that it conspired to
help U.S. taxpayers dodge federal taxes. This was a rare instance in which a
large company actually had to plead guilty to a criminal charge.
The frustrating
truth is that the global financial system is dominated by big banks that seem
to have little respect for the law and for financial regulation, but they do
not hesitate to turn to government when they need to be rescued from their own
excesses.
