Bloomberg ran quite a story, yesterday. It stems from a Freedom of Information Act Request that yielded the details of previously secret borrowing from the federal government to the biggest banks.
The bottom line, reports Bloomberg, by March of 2009, the Fed had committed $7.77 trillion "to rescuing the financial system, more than half the value of everything produced in the U.S. that year." The lending began in August of 2007.
The reporting from Bloomberg Markets Magazine is spectacular, so we hope you click over and give the exhaustive piece a read. But here are a few paragraphs that tell you what all of this means:
"The Fed didn't tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn't 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 Fed's below-market rates, Bloomberg Markets magazine reports in its January issue.
"Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
"A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger."
Bloomberg reports that some of big winners of the lending were Citigroup, which made $1.8 billion by "taking advantage of below-market rates on emergency U.S. Federal Reserve loans." Bank of America made $1.5 billion.
Update at 1:51 p.m. ET. Congressman Calls For Hearing:
Rep. Elijah E. Cummings, a ranking member of the House Committee on Oversight and Government Reform, called on Chairman Rep. Darell Issa to hold a hearing about the loans.
In the letter, Cummings, a Democrat from Maryland, says that according to the Bloomberg report Congress was kept in the dark about the loans even while they debated new regulations on Wall Street. Cummings wants that investigated as well as why banks were able to keep the details of the loans from their shareholders.
"Many Americans are struggling to understand why banks deserve such preferential treatment while millions of homeowners are being denied assistance and are at increasing risk of foreclosure," wrote Cummings. "Unfortunately, officials from many of these financial institutions declined to comment about these loans, including officials from Goldman Sachs, JPMorgan, Bank of America, Citigroup, and Morgan Stanley."