Friday, May 14, 2010


We're supposed to feel good about this?

The headlines in the financial world are telling us that we should be happy. Why? Because the amount of money our nation's private banks are stealing borrowing from the American taxpayer Federal Reserve has dipped to about $5 billion per day. So, for the period ending May 12, 2010 the banks only stole borrowed $77.5 billion from the American taxpayer Federal Reserve.

Why is this important? Because the banks can borrow from the Federal Reserve at virtually 0% interest, and then turn around and buy U.S. securities, which pay between 3-4%. Let me emphasize this point:

1. If a bank borrows $5 billion per day from the Federal Reserve (at virtually 0%) they can then ...
2. Walk down the street to purchase U.S. securities, which pay 3-4% interest ...
3. Then collect between $150 - 200 million in interest, for no other reason than they are a bank.

Well, I guess borrowing $5 billion a day is better than when these guys were borrowing $188 billion a day at virtually zero percent interest, which they did at the height of the meltdown.

My only question is where do I sign up?

Oh, that's right. We can't. We're not banks. We're just taxpayers who get to fund and subsidize this banking bonanza. But wait. It gets even better (or is that worse?)

It turns out that the American taxpayer Federal Reserve is now on the hook for more than $67 billion (Table 1: Look for lines "Net portfolio holdings of Maiden Lane" I, II, and III)  because we've they purchased the toxic crap that came out of failed Bear Stearns, and the toxic crap (CDOs) that AIG had on their books. Why is this important? Because by purchasing the failed "investments" of Bear Stearns and AIG at contract price (not market price, because the market tanked) our money allowed America's financial institutions to say, "Look, our investments paid out ... we can now pay ourselves 100 cents on the dollar ... where's my bonus?).

It actually gets worse when you look through the Federal Reserve numbers. But I think I'll leave it alone for now.

- Mark

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