There is a fascinating new study coming out of the Levy Economics Institute of Bard College.  Its titled “$29,000,000,000,000: A Detailed Look at the Fed’s Bail-out by Funding Facility and Recipient” by James Felkerson. The study looks at the lending, guarantees, facilities and spending of the Federal Reserve.

The researchers took all of the individual transactions across all facilities created to deal with the crisis, to figure out how much the Fed committed as a response to the crisis. This includes direct lending, asset purchases and all other assistance. (It does not include indirect costs such as rising price of goods due to inflation, weak dollar, etc.)

The net total? As of November 10, 2011, it was $29,616.4 billion dollars — (or 29 and a half trillion, if you prefer that nomenclature). Three facilities—CBLS, PDCF, and TAF— are responsible for the lion’s share — 71.1% of all Federal Reserve assistance ($22,826.8 billion).

One comment about some of the folks pushing back against this massive total: Yes, there is a big difference between a $100 lent for 3 days, and a $100 lent overnight rolled over 2 more times. And there is an enormous difference when temporary overnight lending lasts for three years.

Overnight lending, by its definition, is temporary, short term, lower risk, modest impact. It exists to allow slightly over-extended banks to meet their reserve requirements. But rolling overnight lending repeatedly for 3 years is none of those things. And it makes a mockery of these same reserve requirements, and the protective purposes they are supposed to serve.

The amount of overnight lending reflects how broken our financial system really is. A well capitalized, moderately leverage system does not require this massive liquidity from a central bank — interbank lending should be sufficient. What the data reveals is that the financial sector remains dangerously under-capitalized and overleveraged.

To pretend these were merely minor overnight loans, rolled over once or twice, is foolish, dangerous nonsense.

~~~

Cumulative facility totals, in billions

Source: Federal Reserve

Facility Total Percent of total
Term Auction Facility $3,818.41 12.89%
Central Bank Liquidity Swaps 10,057.4(1.96) 33.96
Single Tranche Open Market Operation 855 2.89
Terms Securities Lending Facility and Term Options Program 2,005.7 6.77
Bear Stearns Bridge Loan 12.9 0.04
Maiden Lane I 28.82(12.98) 0.10
Primary Dealer Credit Facility 8,950.99 30.22
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility 217.45 0.73
Commercial Paper Funding Facility 737.07 2.49
Term Asset-Backed Securities Loan Facility 71.09(.794) 0.24
Agency Mortgage-Backed Security Purchase Program 1,850.14(849.26) 6.25
AIG Revolving Credit Facility 140.316 0.47
AIG Securities Borrowing Facility 802.316 2.71
Maiden Lane II 19.5(9.33) 0.07
Maiden Lane III 24.3(18.15) 0.08
AIA/ ALICO 25 0.08
Totals $29,616.4 100.0%

>

Source:
BERNANKE’S OBFUSCATION CONTINUES: THE FED’S $29 TRILLION BAIL-OUT OF WALL STREET
L. Randall Wray
Economonitor, December 9th, 2011
http://www.economonitor.com/lrwray/2011/12/09/bernanke’s-obfuscation-continues-the-fed’s-29-trillion-bail-out-of-wall-street/

Category: Bailouts, Economy, Federal Reserve

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

62 Responses to “Bailout Total: $29.616 Trillion Dollars”

  1. Note: The research note: “$29,000,000,000,000: A Detailed Look at the Fed’s Bail-out by Funding Facility and Recipient” by James Felkerson, forthcoming, Levy Economics Institute == was based on data analysis conducted with Nicola Matthews for the Ford Foundation project “A Research And Policy Dialogue Project On Improving Governance Of The Government Safety Net In Financial Crisis”

  2. willia451 says:

    This might be true. But what was the alternative? 30% unemployement and Depression? Nationalize all “Too Big to Fail” banks and make public all their debt?

    Its one thing to sit back and say the Fed is in way too deep. Given. But SOMEBODY has to step in and clean up the mess when capitalism fails. Who’s going to do it? Congress? The States? The President? The UN? The IMF? The World Bank? Who?

    No. I believe the Fed did what it had to do. And its going to be a very, very long slog out. If we can ever really get out at all. Lost decade? No. Its going to be a lot longer than that.

    ~~~

    BR: The alternative was a Swedish style nationalization — prepackaged bankruptcy, Feds provide Debtor-in-possession financing, take a year to reorg, than spin out each firm / division as an adequately capitalized, appropriately leveraged clean financial institution.

    You know, like free market capitalism.

  3. james eliot says:

    Ridiculous. The numbers are big enough without having to engage in a silly addition exercise to gross them up even further. Ask yourself what the Fed’s maximum aggregate credit exposure on any given day during the relevant period was. It was nowhere near $29 trillion. Sure, rolling over short term debt continuously betrays the lie that it was short term, but the Fed’s credit exposure didn’t double on the rollover: the first loan was REPAID with the proceeds of the rollover. So, it’s just sophistry to add the second to the first and suggest that this was the Fed’s (and by extension, the taxpayers) real risk.
    I don’t know what the point of this sophmoric distortion of the record is intended to accomplish. You don’t need to engage in double and triple and quadruple counting (such as Randy does) to conclude that the Fed’s intervention was enormous and unprecedented, that the banks who required that intervention for their very survival had grossly mismanaged their liabilities and balance sheet risks and that fundamental reform of a system that allowed them to lever up so recklessly and to rely on the Fed’s bailing them out so assuredly is required.

    ~~~

    BR: I disagree.

    The fact that these are days not years makes no matter.

    It makes a mockery of short term overnight lending to carry it for 3 years. These are supposed to be minor cap requirement facilities — not an ongoing permanent line of credit.

    To show you how ridiculous that argument is, why does the 30 year treasury yield more than the 10 year? Isnt merely a 10 year rolled over 2X?

  4. emaij says:

    A corollary to The Greater Recession and The Big Lie is The Great False Dichotomy – the one where people assert, “If we had done nothing, the world’s economy would have imploded.” The alternative, as BR illustrates here and countless other places, was not “doing nothing”. No one was suggesting doing nothing. I have that eye-rolling conversation on a regular basis. It’s disappointing to see it being adhered to by readers of BR’s blog. If readers here have bought into it, imagine how pervasive that thinking is out there.

  5. AnnaLee says:

    BR, I see your point but I agree with jame eliot. There must be a better way to deliver the BR message than to use the misleading additions JE is pointing out. Transactions are not the same as outstanding balances.

  6. Greg0658 says:

    pile pushing is an absolute art in the 21st century .. wonderful GDP for all

  7. rootless says:

    One comment about some of the folks pushing back against this massive total: Yes, there is a big difference between a $100 lent for 3 days, and a $100 lent overnight rolled over 2 more times. And there is an enormous difference when temporary overnight lending lasts for three years.

    One day, three days, or three years. It’s still only $100 which are at risk, and not 2x$100, or 365x3x$100, unlike it is presented with the “$29.6 trillion”.

  8. msl46 says:

    Tell you what. I’ll lend you $1 overnight. And I’ll commit that if you want to roll it, I’ll roll it for up to three years. That’s a $1,095 loan (right?). I’ll only charge you 1% interest, which is a great deal. I calculate it at $10.95. Just pay me the interest up front.

    Is my math wrong here?

    ~~~

    BR: You are focusing on the wrong aspect of this. overnight lending is supposed to be a temporary facility between the banks to ensure they meet capital requirements; Instead, its become a permament shift of cap req to the Fed.

    No longer overnight, no longer temporary, and the taxpayers — not the banks — are providing the capital.

  9. Transor Z says:

    I’d want to see the actuarial science applied to justify the authors’ conclusions about the proper treatment of “short-term”/overnight lending that was a de facto three-year commitment.

    Clearly, the Fed’s actual risk was greater than on true overnight loans.

    I guess put simply, the question is how much a bank would have to pay another bank at market rates for a three-year commitment to provide whatever overnight lending was required.

    In historic context, the answer is that such loans were unavailable during the period in question, which is why the central bank needed to act as lender of last resort. But as another author wrote recently, there’s been no accounting for the RISK taken on by the Fed in performing this last-resort function.

  10. KidDynamite says:

    hi barry –

    No – a 30 year treasury is most certainly not “merely a 10 year rolled over 2X” – I’m *positive* that you know this.

    More importantly: Prof Wray’s analogies are way off. He writes:

    “Think about it this way. A half dozen drunken sailors are at the bar, and the bartender refills their shot glasses with whiskey each time a drink is taken. At any instant, the bar-keep has committed only six ounces of booze. That is a useful measure of whiskey outstanding. But it is not useful for telling us how much the drunks drank. ”

    On the contrary, the proper analogy is that the drunken sailors don’t DRINK the whiskey, they merely hold up their shot glasses, showing the bevy of ladies that they have full cups, impressing them (LIQUIDITY!). Then, they pour the whiskey back into the bottle, and the bartender pours them a new round in 30 minutes when the next group of ladies arrives (revolving loan).

    I think JamesElliot’s comment above was very well put and accurate.

  11. Greg0658 says:

    Grover on CNBC yesterday – USPS pushers 900K to 500K – what where did you pull that from
    http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1514&context=key_workplace

    “spending more money doesn’t get you more service. the year 2000 will were 900,000 people getting paid by the post office. that’s dropped by 300,000. mail is still being delivered. and they now decide they really only need 200,000 fewer than that. so we were paying 500,000 people at the post office for work that doesn’t need to be done. and even then the post office’s monopoly ought to be taken away”
    http://video.cnbc.com/gallery/?video=3000060475

    I say pay USPS in blue dollars – remember the color that must be turned green to export out of our sphere – monopoly snopoly – all this pile pushing is to convince someone to send labor dollars this way – and our problem in the USA is manipulators convincing us pile pushing is in our best interest – hogwash

    psst – after we switch the USPS to blue dollars then maybe a 50cent 1st class stamp .. to bring inline with delivery costs of the business of pile pushing

  12. Petey Wheatstraw says:

    Regardless of whether the bail-out funding was cumulative or revolving, the banks were bankrupted by their own incompetence, chicanery, and criminality. As for the idea that systemic risk required such a lending arrangement, why should those who torpedoed what was a relatively stable financial system be allowed to remain high and dry while those they sought to defraud and debt-enslave ensure their continued positions of relative safety and comfort? That’s not how our system was designed to work.

    For a dollar or a dime, bankrupt is still bankrupt.

    If, in the end, the result was that we all shared in the loss, that would be fine. As things currently stand, we have had both injury and insult heaped upon us.

    At a minimum, the best thing we could have done (“we” in this case, meaning the consumer/worker classes), or still could do, is to make damn sure that if we’re forced out of the system, we take those who caused the crash with us. Tilting the playing field further, to their advantage, is simply stupid.

  13. ot says:

    you can’t complain that others have been deliberately misleading from a moral high ground while doing the same thing yourself. when the government is paid back and makes a profit at higher that prevailing rates, it isn’t even a bailout. the fact that at those moments of stress there aren’t others willing to do so but by lending temporarily the government makes a handsome profit, only argues for doing it.

  14. Petey Wheatstraw says:

    ot:

    Please explain the relationship between, and the reason(s) for, the burgeoning wealth of the top 1% in light of our ever increasing deficits and debt.

    The government makes a handsome profit off of the banks? Really?

    REALLY?

  15. Petey Wheatstraw says:

    Forgot:

    The government borrows from China to lend to the banks.

  16. PDS says:

    One word…..ICELAND!!!…..lessons learned….only bailouts there were for arrested pols and banksters who could make bail

  17. dead hobo says:

    BR queried:

    BR: I disagree.

    To show you how ridiculous that argument is, why does the 30 year treasury yield more than the 10 year? Isnt merely a 10 year rolled over 2X?

    reply:
    ———–
    No, apples and oranges. This is elementary economics. Please review the concepts of default risk and interest rate risk in relation to time and contracts. This is chapter 1 stuff from elementary texts on credit, I suspect.

  18. Moe says:

    … scrutinizing minutea – the damage is done – move on.

  19. Its REPO to Maturity, with no maturity date.

    It is infinite rollover that is unreserved credit.

    And, it makes a mockery of reserve requirements

  20. Greg0658 says:

    my sorta offT in this thread .. imo (not humbly) watching the hearings on USPS fixes .. its plainly laws attempting to sink a public sector business to send FreeMarketCapitalism a gift .. thats my world view and I’m sticking to it

  21. zell says:

    The gov’t made a profit is bunk. The collateral damage of the finance industry is immense ( I don’t mean collateral in the financial sense but in the military sense). The damage done to the economy is immense and gov’t has to pick up the bill for that- and we are nowhere near the end of that monumental expense.
    Only a banker can come up with such a fraudulent perspective. “They paid the money back” is misdirection. We have hit the Easy Button too often- there’s only weak impulse left, and Bernanke has taken a hammer to it. The damage is ongoing- there is no “moving on.” There were alternative approaches and there still are. Enough Wall Street propaganda.
    Europe has improved on kicking the can down the road; they’ve kicked it into the high brush.

  22. GeorgeBurnsWasRight says:

    And we still allow them to make fake profits selling bogus pieces of paper called derivatives, where companies with few or inadequate assets agree to pay large amounts of money under certain circumstances, and then “insure” themselves by making offsetting agreements with other companies who also lack the resources to make good on their end of the agreement.

    A house of cards has more integrity than our financial system with all these derivatives far in excess of the world’s GDP, much less the world’s assets.

  23. dead hobo says:

    Moe Says:
    December 9th, 2011 at 9:13 am

    … scrutinizing minutea – the damage is done – move on.

    reply:
    ————
    Ordinarily, I would agree. But this post is a an example of a different problem. Bloomberg wrote a piece that appeared to state 100 loans of $100, each for 1 day created the same exposure 1 loan for $10000 for 100 days. Or, at least, that’s the take away I got from it. This post makes a similar analysis. Then implies taking steps that would have ended up in a Greater Depression would have been the best course of action, as opposed to short term loans of freshly printed and collateralized money which helped prevent a chain reaction liquidity crisis.

    Similarly, it’s become ‘common knowledge’ that rising commodity prices are good for the economy because they ‘signify higher demand ==> growing economy’ … even in the absence of any economic information on actual growth or explanation how a three month asset bubble in a given commodity translates to economic growth over that period of time. Or how rising commodity prices are somehow magical in that they don’t correlate to rising manufacturing costs and decreased profits or diminishing disposable incomes. And how financial writers ignore how decreasing disposable incomes correlate to decreased GDP net of the commodity that rose in price.

    Anyone can say something stupid on any day about anything. Even moi. I an simply noting a long term trend among myriad financial writers and TV personalities that appears to glorify uncritical thinking applied stubbornly and kneejerk false relationships.

  24. rootless says:

    One problem with the “$29.6 trillion” is that is has the wrong unit. If this is the outstanding balance integrated over time, the correct unit is 29.6 trillion dollar*[time unit]. I guess the time unit is days in this case. So, the statement should be “the bailout has been 29.6 trillion dollars days.” Otherwise the result is arbitrary depending on what incremental time period is taken for the summation. Why use days? Why not seconds? Why not claim the bailout has been 2,558,822.4 trillion dollars (29.616 trillion x 24 x 60 x 60)?

  25. Disinfectant says:

    I agree with several others above. This shoddy, ideologically driven analysis is exactly the kind of crap that we come to Barry’s blog to see him RIP APART, not support.

    Barry, all of your complaints about the financial system are reasonable, but you know that doesn’t justify using flawed data to make your argument.

  26. DeDude says:

    My concern is that the regular fools somehow end up interpreting this as some kind of trillion dollar Fed hand-out to the banks. The reality is that most of it just reflects the Fed doing what it is supposed to do in a financial crisis. Under normal (non-crisis) conditions banks will lend billons of dollar to each other short-term, with collateral backing up the loans. In a financial panic the collateral and viability of all banks get questioned; more based on rumors than on reality. As a result lending freeze up. In that situation it is the job of the Fed to step in and provide liquidity even if it takes a risk in doing so. They should provide loans with more risky collateral, at a slightly above normal market rates. If they don’t, you get a financial collapse and a major depression. You need to put this number into context as in how large a % of normal bank-to-bank lending was taken over by the Fed. And then point out that it represents how severe the crisis was not how much the government handed over to private banks.

    What you need to tell people in order to get this number into perspective is how much money the banks lend to each other during the 3 years before the crisis. It’s a lot more than what you list there. Look at the size of the currency markets if you simply add up daily tradings for 3 years; it’s easy to generate a big meaningless number. But it is misleading if you fail to clearly delineate all the details of what is in it.

    I agree that the Government should have taken a harder approach and demanded a deal like Buffet got in it’s bail-out of banks. But the Fed lending facilities were just part of them doing their job.

    ~~~

    BR: I agree with you about the crisis part — but are we still in crisis three years later?

    At what point does this become a permanent facility?

  27. jd351 says:

    I love all the comments back and forth about the subject matter at hand. My question is what happen to
    “Capitalism and the Free markets”. If we had capitalism and free markets we wouldn’t be having these discussions about the banks . They would be gone , plain and simple

  28. msl46 says:

    BR – Sorry you think I’m “focusing on the wrong aspect of this” but, to be fair, I’m focusing on the fact that your *headline* is a gross exaggeration.

    Saying “overnight lending that is expected to be, and is, rolled for months or years has a different risk profile from overnight lending that is really meant to address short-term deficits” is perfectly legitimate. Saying “… and therefore the Fed had $29.6 trillion at risk” or “… loaned banks $29.6 trillion” is simply, obviously, arithmetically, demonstrably false. If you disagree, don’t tell me that overnight lending is supposed to be temporary – take me up on my offer. $1 a night, rolled for 3 years, at the low low interest rate of 1%, for a total interest of $10.95.

    ~~~

    BR: The headline appears to be a gross exaggeration — until you think about what overnight lending is.

  29. HububBub says:

    Elliot and the kid are right – this new “study” is sophistry. I also found cute the inclusion of $10 trillion central bank liquidity swap. It’s one thing for Grayson et. al. to conflate a loan and a swap (esp. where the only counterparty you face is the ECB) but I would expect more from denizens of economics “institutes,” to say nothing of asset managers.

  30. SOP says:

    Although the war was already lost, the Generals continued to bicker in their bunker over the details of a old battles … (with occasional breaks to talk about christmas gifts).

    Meanwhile, outside their bunkers, the refugees were grasping forks and knives… (everywhere there’s lots of piggies, living piggy lives…)

  31. DeDude says:

    jd351;

    You are talking about the good old days before the Fed when our capitalism produced a depression every decade so that productivity and capacity utilization would dip way down. Those were the good old days of efficient “Capitalism and the Free Markets” at its most glorious workings? I wonder why someone decided that we needed to stop these cycles of stupid greed – and I wonder if efficiency and capacity utilization and quality of life became better or worse after that intervention?

  32. streeteye says:

    So the controversy is, did the Fed provide a s***load of cash ($1.5 trillion per Bernanke) with few questions asked, or 16 s***loads?

  33. Moe says:

    Hello Dead Hobo:

    I’m jaded today – I agree with the rampant uncritical thinking. Who do you trust as a source anymore? Who out there has no agenda? For every missive that states that “grass is green” I can find ten others that state “there is no grass at all”. I want to go back to the days when Walter Cronkite gaves us the days news at night and there was no perceived need or value in getting it any sooner. It’s all garbage-in, garbage-out these days (except for this site of course)Guess I’m becoming a Luddite.

    Have yourself a great weekend!

  34. brianinla says:

    Hey msl46, I’ll take you up on your offer. But instead of $1 make it $10billion – do you still want to do the deal?

  35. BR,

    this..”…Overnight lending, by its definition, is temporary, short term, lower risk, modest impact. It exists to allow slightly over-extended banks to meet their reserve requirements. But rolling overnight lending repeatedly for 3 years is none of those things. And it makes a mockery of these same reserve requirements, and the protective purposes they are supposed to serve…”

    is a very good Point.

    and, with..”…The amount of overnight lending reflects how broken our financial system really is. A well capitalized, moderately leverage system does not require this massive liquidity from a central bank — interbank lending should be sufficient. What the data reveals is that the financial sector remains dangerously under-capitalized and overleveraged.

    To pretend these were merely minor overnight loans, rolled over once or twice, is foolish, dangerous nonsense.”

    the whole Point is spot-on.

  36. Thank you Mark Hoffer !

  37. Moss says:

    These figures simply prove how dire the situation was. Many lies were spun to hide the real situation.
    How many times did we hear that ‘we don’t need the help’. They all lied; in public statements, to Congress, in many financial statements, to auditors. They ALL violated Sarbanes Oxley, and who know what else.

  38. SOP says:

    MOSS

    “These figures simply prove how dire the situation was. Many lies were spun to hide the real situation.”

    And how dire is the situation now? How many lies are being spun to hide the real situation?

    Oh, and what gadgets or trinkets are you buying for christmas?

  39. Lugnut says:

    That number is still dwarfed by the notional derivative exposures still present in the (unregulated OTC) market.

  40. theexpertisin says:

    Considering this mess, it could be observed that it is better to receive than to give.

  41. Newsboy says:

    “You are talking about the good old days before the Fed when our capitalism produced a depression every decade so that productivity and capacity utilization would dip way down. Those were the good old days of efficient “Capitalism and the Free Markets” at its most glorious workings? ”

    The Fed isn’t even a century old yet, and was created to solidify the stranglehold of banksters over the fastest growing “productive” nation on the planet.

    A lot of history has passed since the “good old days before the Fed”, though I doubt you’re aware of the import it represents to the American Experiment…

    “This act establishes the most gigantic trust on earth…When the President signs this act, the invisible government by the money power, proven to exist by the Money Trust Investigation, will be legalized…The new law will create inflation whenever the trusts want inflation…” ~ Congressman Charles A. Lindberg, Sr.

    ” I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”
    ~ Woodrow Wilson

  42. DrungoHazewood says:

    “I wonder why someone decided that we needed to stop these cycles of stupid greed”

    You’re kidding, right? We’ve now got stupid greed on steroids. You are one heinous shillbag.

  43. DeDude says:

    I agree that 3 years later “temporary overnight support” would be problematic. But exactly how much is the outstanding balance on these facilities today? My understanding is that almost nobody is using them because the market now provides the same overnight liquidity for a lower price. However, they are kept in place because that is easier than it would be to create them again if the Euro goes down. Is that not so?

  44. DeDude says:

    @DrungoHazewood;

    We actually have not had cycles of depressions every decade, even though the de-regulators managed to get stupid greed back in shape as of lately.

  45. brianinla says:

    Excellent point regarding derivatives. The Fed loans allowed the leveraged derivative crap to remain in existence, counted as assets on bank’s balance sheets, and which many will draw a hefty bonus due to the continued fraud. Something which would not have occurred if the Treasury was in charge of the money supply instead of a private central bank. WMDs are not in the middle east, but in NYC, sitting as derivatives threatening the entire economic system, and it’s pathetic how many on this thread defended the status quo.

  46. usadrift says:

    As a former bank CEO I can attest to the fact that rollover borrowings are a sign of serious financial difficulty. Borrowing at the Fed used to be severely discouraged, and rollovers were never the intent either. The banks should have been washed through a bankruptcy. That would have punished the bad actors, cleaned up the balance sheets once and for all and freed up borrowing. Instead, government allegiance was to the financial industry that lavished millions on presidents and Congress rather than allegiance to the people they were supposed to serve.

    This approach of backroom underwriting leaves the economy still crippled and the people who bore the brunt of the malfeasance, home owners, without their homes or in fear of losing them.

  47. bear_in_mind says:

    Damn it, Barry, do you want Capitalism — or not?!

    I agree with many comments that the headline can be construed as sensational, but you have to see the greater context here. The “A-ha!” moment is namely the “bailout” of the banks never ended, folks.

    While ‘The Bernank and Timmy G.’ continue to trumpet the billions in government ‘profits’ all these TAXPAYER FUNDED slush funds generated, they slyly fail to mention that they’re still actively propping-up the banks with NO END IN SIGHT.

    What started as temporary obfuscation by the Fed and Treasury appears to reflect a chronic lie, repeated again and again, to extend-and-pretend there’s nothing to worry about. The ‘Great Oz’ is at the controls!

    Does anyone think the cost of this ruse will be reduced by perpetuating it indefinitely? Who will shoulder the cost of this, either through lost GDP & productivity; higher taxes; UE; inflation; or a delicious confection of all-the-above? It’s going to be you and I, grasshopper… you and I.

    To Barry’s larger point, does anyone think this is the BEST and/or ONLY solution available? That’s the biggest obfuscation of all.

    As MF Global just showed us, the banks are still running the casino! We CITIZENS could demand an end to the charade and overwhelm Congress with calls to begin moving sick financial institutions through into a re-born Resolution Trust Corporation.

    Or, we continue to sit idly and watch America tumble ever-deeper down the fiscal rabbit hole…

    Respectfully,
    ~B-I-M

  48. escapeartist says:

    I may be late to the party, but it seems to me (and really, what do I know?) that this entire bailout discussion is smoke and mirrors. . . here we are nitpicking what essentially amount to semantics on whether a glass is half full or half empty while Bloomberg/Bernanke/et al distract us from the larger issue: Why are we having this conversation at all? What parties are culpable? Who will be held accountable? Where will reparations come from? What changes will we make to ensure this never happens again?

    All the way around it boils down to greed and the balance sheet lies told to perpetuate that greed, and until there is a measure of human accountability that will never change. Sure SCOTUS says corporations are people and money is free speech, but a corporation can’t be made to serve time. The behavior won’t change until the people who run corporations are made to see that there are criminal consequences on an individual basis, even for the unintended fallout. Ignorance is not a defense.

    I really don’t care whether glass is half empty. I want to know, who pissed in my beer and left me with the tab?

  49. [...] cost $29 trillion December 9, 2011 cullino Leave a comment Go to comments $29 trillion dollar to bailout the banks. Barry Ritholtz writes about a study by the Levy Economics Institute of Bard College [...]

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  51. csainvestor says:

    couple this with the recent bloomberg article
    http://www.bloomberg.com/news/2011-12-06/bloomberg-news-responds-to-bernanke-criticism.html

    and here’s my question:

    the fed committed trillions to prop up the finance sector- worldwide.
    they committed, guaranteed, and loaned trillions- but they only printed about a trillion.

    did this massive undertaking cause inflation- the fed threw everything including the kitchen sink in order to macgyver the financial sector so that it could live another day- even though they only officially printed one trillion- did the trillions with all of these facilities weaken the dollar?

    even though they didn’t print trillions, if the crap hit the fan- they might have been forced to.
    did the very threat, or just the fear of trillions of potential dollars being created- cause the dollar to weaken?

    did purchasing power wane, not just because of real money printing, but the potential for money printing?
    if it did, the tax payers really did bailout the banking sector with an anemic dollar, and a draconian inflation tax.

  52. amboycharlie says:

    If the banks and bondholders and derivatives holders have been made whole by the Fed and the taxpayers, to the tune of thirty trillion green, it would seem to me that the government and the FRB should hold clear tile to all these debts, and should be free to rent or sell the properties to the highest bidder. But there is no way the original creditors should be permitted to foreclose and resell.

    http://bonalibro.us

  53. dead hobo says:

    BR replied:

    BR: The alternative was a Swedish style nationalization — prepackaged bankruptcy, Feds provide Debtor-in-possession financing, take a year to reorg, than spin out each firm / division as an adequately capitalized, appropriately leveraged clean financial institution.

    You know, like free market capitalism.

    reply:
    ———–
    With respect to removing crippled and criminal enterprises from the economic rolls, good idea. However, doing this without FIRST taking into consideration massive liquidity problems and the certainly resulting mega depression is an example of naive thinking. The Fed and all other central banks removing liquidity risk prior to fixing the problem is good. Both in that contraction and the current European one.

    Some sort of Calvinistic belief that all must suffer to fix the problem is wrong. Not fixing the problem after removing liquidity risk is a different problem that is conflated into one big tangled ball of issues that pundits want to solve with one big mega-solution. Ignoring liquidity risk on a world wide basis makes this a sterilized and unrealistic textbook discussion. Believing that an honest and fully working banking system will rise from the ashes, thus justifying the massive self inflicted punishment is also a bit naive. I’m sure our financial criminals are far more sophisticated than Sweden’s. Of course, Congress could pass a law preventing it (HA HA). In fact, I’m sure a small number would profit beyond imagination if large scale financial failures occur occasionally.

  54. bcainw says:

    Oh let’s look at the “even bigger picture.” LOL.

    The derivatives market — which has basically turned every economic instrument into casino chips (mutual funds, stocks, annuities etc.) — is “valued” at about 1.5 Quadrillion dollars. That would be 1.5 thousand trillion dollars. In other words, in order to pay all the pensions, annuities etc. these “bets” would have to eventually yield 1.5 Quadrillion dollars.

    The “fly in the ointment” is that if you took the value of every asset on planet Earth it would only add up to somewhere around 150 Trillion: about a tenth of the value of the derivatives market.

    So “eventually” most pensioners, wage earners and others are going to be impaled as this fake “Petro Corporate Ponzi” Epoch comes to an end. The Elite is basically using the media to obfuscate the impending destruction of our currencies and assets. They meticulously turn the screws just slow enough so that subgroups within the economy are slowly suffocated while holding the rest hostage with the false hope that “their assets” will somehow be preserved. Meanwhile as the value of hard assets (e.g., land, homes) are destroyed the Elite buys them up with this borrowed money with “pennies on the dollar.”

    This is very similar to what occurred with the Great Depression in 1929 and was a direct consequence of the Big Ponzi scheme that we now know as the Federal Reserve, which is neither Federal, nor is it a reserve of anything but false promises. So we allow a private amalgamation of the Elite (the Rothchilds, IMF, WTO, EU, WB, Council of 300 etc.) to print money out of thin air and further allow them every advantage to profit from every small rise and fall of the markets.

    It is worth noting that no politician will currently acknowledge that our founding fathers were against Central Banks for very good reason. Consider this quote from Thomas Jefferson:

    I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

    Snopes, by the way disputes this, however it is clear that such thinking was shared by Washington, Jefferson and Franklin
    http://www.snopes.com/quotes/jefferson/banks.asp

    Soooo regardless of whether Jefferson said this or not the quote succinctly summarizes what occurs when you allow an Elite to print money out of thin air and profit from the interbank distribution of this money at a ratio of over 30 to 1 at this moment in time.

    The bottom line is that the only way we — Americans and Europeans survive — is through a Jubilee for the masses. In other words we must bail out mainstreet and insure that the masses retain their ability to have housing, food and clothes on their back. Otherwise we become slaves to an emerging Global Elite. People like Micheal Hudson and others have hinted at this solution and I think it the only solution should we not want to find ourselves as indentured servants to a Global elite,

    Solutions:

    * Take that 30 Trillion back from the Banksters and distribute it back to the people: that would be 30 Trillion / 300 Million here in the US: about $100,000 per Legal American Citizen.
    * Impose tariffs as we retool our industries and once again begin manufacturing our own goods.
    * Create a “People Reserve” as we end the Federal Reserve. At least this way the Elite never makes a fucking dime off of “created money” and debt (e.g., the interest on the priniciple).
    * Rejuvenate the agricultural, industrial, medicinal and recreational uses of Hemp (e.g., Marijuana) for our energy, food, supplements, hempcrete and the thousands of other products possible from growing this very important plant.

    I’m not really trying to sugar coat this, but it is the only way to transition between the crashing “Petro Corporate Ponzi” Epoch that is fast approaching it own predictable end (e.g., exponential growth systems always fail in the real world.

    And it should be understood that Obama is the Shill in Chief that was put in office to execute the destruction of the economic survivability of the American People. He was put in office to usher in the “End Game” and once again relegate the American and European people to a new era of slavery.

    And if bringing in the first Black President to reinstitute slavery is not the ultimate insult, by the Global Elite toward the people, then I really don’t know what to tell you.

    Again, we are not at the beginning or end of a mere cyclic business cycle. We are at the end of an unsustainable exponential growth Ponzi Scheme that is now being further perverted to rob to people of both their past and their future.

    Time to wake up?

    New Candidate for 2012 Presidency wants a “Green Economy” Based on Marijuana
    http://www.newagecitizen.com/MERP/RelegalizeNowObama57.htm

  55. louis says:

    http://www.youtube.com/watch?v=ZPtjyqgZAUk

    “You look like your decorating a Christmas Tree”

  56. Greg0658 says:

    bcainw .. interesting for awhile
    “ustood that Obama is the Shill in Chief” .. at that point .. you jumped the shark
    picking a side .. I will too (jump the shark)
    been drinking .. blogin . spinin tunes .. watchin Army/Navy (sorta) Go Army!!!! (ya Commander is there* / where else on a Saturday the 10th of Decenmber)
    FMCitBPtP (really ?)

    * can’t hear call by call – tunes ya know

  57. Webe says:

    > bcainw & 1.5 quadrillion in derivatives & the biger picture
    > these “bets” would have to eventually yield 1.5 Quadrillion dollars

    Wrong: This is not an accurate explanation of what the derivatives pyramid means.
    The nominal reference amounts to which the contracts refer have been double counted many times, since many derivatives refer to the same underlying assets or contracts. The nominal amount is also not a liability which must eventually be yielded — only in some specific cases could the nominal amount become a liability (e.g., in some cases upon failure of a counter-party no assets at all). If I were to buy an insurance against a leaking roof, specifying that if the leak is so bad it fills a 10 litre pail of water by dripping, then I will be compensated for repair costs to the roof exceeding 20% of the costs of the roof, where the value of the roof is stated as 10.000, then clearly the reference amount need not ever turn into a liability for the same amount.

    The true meaning of the derivatives tower is that it spreads risk in such a way that no capital is reserved against individual risks, but risk is spread throughout the system (underpricing actual risks), making the whole system vulnerable to large enough shifts. The system makes it cheaper to buy off risk, but at the cost of redundancy or resilience in case of catastrophic failure: any one domino is less likely to fall, but there is more chance that when a domino does fall, all the others will go along.

    The real problem is that as long as people feel they are insulated from the risk of losses, they will take much larger risks, buying more of certain assets, driving up prices beyond what they would otherwise be, mispricing the assets and creating false demand. In this way derivatives function as extra leverage to push financial asset prices around, in exactly the same way that (selective) extra liquidity can distort supply/demand equilibria.

    Now that it has become apparent that the price of all these assets must reset, the system is stuck, because the backstop is nothing more than the same infinity of a dressing room mirror image that fostered too much buying to begin with: virtual liquidity. The capital is not there, and the assets cannot simply be repriced (sold) because they have all been bought by taking on debts which do not reprice.

  58. [...] le site The Big Picture, le bien nommé pour la circonstance, qui présente cette étude le 9 décembre 2011. Une autre source (Economonitor.com ) présente cette étude, également le 9 décembre [...]

  59. Asymptosis says:

    I think the $29 trillion should be specified in something other unit than dollars. Because it includes time as well.

    How about the number of “day-dollars” lent by these programs — each unit is one dollar lent for one day.

  60. Motoaz says:

    Thank you for the education. Some very astute mathmaticians giving their take. Unfortunatly this is the problem you are all trying to solve. TAKE TAKE TAKE =? Truth or Consequences.
    The dillusional moving cups has us all mesmerized……good luck with your accounting of it all.
    Grace be with us all, Mark in Mayer