federal reserve bailout wall st state bank

Take Your Money and Run
sanders cantona bankrun stopbank

Federal Reserve -- We loaned banks trillions

The Fed at last gave Congress the info it had asked for. Given the revelations, some critics say take your savings out of the bigs and put them in the littles. Could that be a step toward geonomics? We trim, blend, and append four 2010 articles from: (1) Christian Science Monitor, Dec 1, on the bailout by Mark Trumbull; (2) Huffington Post, Dec 2, on the Fed by Bernie Sanders, independent US Senator from Vermont; (3) OpEdNews, Nov 22, on withdrawal by Dave Lindorff of a journalist-run online alternative newspaper; (4) and Onward Oregon on a state bank.

by M. Trumbull, by B. Sanders, by D. Lindorff, and by Onward Oregon

The Federal Reserve has lifted its veil of secrecy, revealing it loaned Wall Street trillions, largely at interest rates below 1%. Sen Bernie Sanders, who led the charge for Fed transparency, called for an investigation to determine whether banks borrowed at near-zero interest and then loaned money back to the government at higher rates.

Some longer-term loans also measured in the trillions of dollars. In one program, the Fed doled out nearly $9 trillion in funds to borrowers such as Morgan Stanley and Merrill Lynch.

The data may show the Fed was too loose in the quality of collateral that it accepted in exchange for loans. Also, the bailouts may have helped to line the pockets not only of banks in general, but also of their top executives.

Since the loans have largely been repaid in full, they appear to impose little direct cost on the public. The indirect cost include: making financial firms believe they are too big to be allowed to fail encourages risky behavior, and thus sow the seeds of future crises.

Also, while scores of banks came to the Fed's lending windows, at the height of the crisis, of $3.6 trillion doled out in the six weeks after Sept 15, 2008 (when Lehman Brothers failed), the Fed loaned $3.1 trillion to just four large Wall Street banks. [Rescuing a few influential insiders while hundreds of small banks fail reduces competition so the remaining banks can raise the fees they charge customers.]

Such bailouts were deeply unpopular with most Americans. Beside the Fedís, the US insured bank debts and the Treasury invested $700 billion TARP (Troubled Asset Relief Program).

The Federal Reserve doled out to every major financial institution in this country. Morgan Stanley, received nearly $2 trillion; Citigroup, $1.8 trillion; Merrill Lynch, $1.5 trillion, Bear Stearns, nearly $1 trillion; and Goldman Sachs nearly $600 billion.

The Fed's bailout was not limited to Wall Street but also included some of the largest corporations: General Electric, McDonald's, Caterpillar, Harley Davidson, Toyota, and Verizon.

The Fed bailed out not just domestic banks but also foreign banks and corporations including two European megabanks -- Deutsche Bank and Credit Suisse.

The four largest banks in this country (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) issue half of all mortgages in this country. They received hundreds of billions from the Fed. How many Americans could have remained in their homes, if the Fed required these bailed-out banks to reduce mortgage payments as a condition of receiving these secret loans?

Millions of Americans are paying high credit card interest rates; why didn't the Fed require credit card issuers to lower interest rates as a condition of the bailout?

Big banks have nearly a trillion dollars in excess reserves, yet the Fed did not require these institutions to increase lending to small- and medium-sized businesses as a condition of the bailout.

Three years after the start of the recession, while big banks and corporations have returned to making huge profits and paying their executives record-breaking salaries, millions of Americans remain unemployed and have lost their homes and life savings.

Eric Cantona, a French soccer star who went into acting, has sparked a European uprising against the global banking industry by calling on people everywhere to take their money out of the big banks on December 7.

Across Europe, Cantonaís challenge is being coordinated on Facebook and via a website called Bankrun 2010. In America, where most protest has been by the Tea Party, a website called Stopbank USA calls for a day of action on December 7.

Organizers suggest not to take money out as cash, but to close accounts at major regional or national banks and to move the money on to independent community banks or -- better yet -- to credit unions.

What if the process started to snowball, continuing beyond Dec 7? Then big institutions' days would be numbered. They depend upon the money of the so-called "small people" to play with in their hedging games, their structured derivative plays, etc.

Would you be better off switching to credit unions? Youíd get better service, higher interest rates on your deposits, fewer fees, and lower loan interest rates. On December 7, Take the Money and Run: Show the Banks and Politicians Who's Boss.

Currently community banks and credit unions donít have access to enough money to lend. And the money state governments receive in taxes and fees? It goes into big banks and straight out of state.

Except in North Dakota; that State deposits the taxes and fees it collects in its own bank.

A state bank is not a for-profit venture, nor is it an alternative to banks and credit unions. Instead, it provides funds to community banks and credit unions. Plus, the state saves millions in reduced banking fees.

Oregonís 2011 legislature will consider legislation to create the Oregon State Bank. If you think the idea has potential, you could sign a petition of support. click here

JJS: Whether it works or not, hopefully it'll get more people to think about mortgages and our payments for land, now paid mostly to individuals. Would it be better to pay whoever made the land or, barring that, whoever made the land valuable? Thatíd be the community in general. When we do recover and share the worth of Earth, we could lose taxes and subsidies, the policy of geonomics.


Editor Jeffery J. Smith runs the Forum on Geonomics.

Also see:

Let's add Land Speculators to the list, too

Investigating Friedmanism at the Fed

Congress Can't Get the Fed to Reveal Much

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