The Fed and the Caymans: New 'Jaw-Dropping' Bailout Details
December 9, 2010 • 10:57AM

Analyses including some from the staff of Sen. Bernie Sanders, whose amendment has forced the Federal Reserve to release the details of its bank bailouts since mid-2008, continue to show that "TARP was just pocket change" and that the bailout was in the many, many trillions — perhaps in the range of $16 trillion total. Much of it went to foreign financial firms, and/or was loaned by the Fed against crap collateral, in violation of the Federal Reserve law.

Two aspects of these reports are most shocking. First, foreign banks and financial corporations tapped 4,200 different loans/securities purchases under 13 different bailout programs of the Fed for $3.8 trillion total: the credit/financial arms of Toyota, Mitsubishi, Nissan, BMW, VW, Honda; the central banks of Mexico, Bavaria, and Korea, and the Arab Banking Corporation in Bahrain; the British Empire's Inter-Alpha banks Société Générale, Santander, Royal Bank of Scotland, and Banco Popular; and other European megabanks ING, Dexia, HSBC. In one Fed program, the Commercial Paper Funding Facility (CPFF), foreign financial firms got 68% of the $396 billion in bailout loans.

Second, under one of those programs, the Term Asset-Backed Securities Lending Program (TALF), the Fed loaned at least $60.8 billion to more than 100 hedge funds, private equity funds, and other funds located in the Caymans or other British offshore havens.

These funds are, right now, conducting intense speculations on the bonds of various European nations, in particular those of Spain, Portugal, Ireland, Belgium, and now Germany; and they are publicly attacking the European Central Bank for failing to throw in enough of its own buying, to make sure they make superprofits. Is the Federal Reserve currently lending to those funds? Or, through the IMF, to those government?

Third, much of the information which the Sanders amendment required on what collateral the Fed was taking for its many trillions in bailout loans, is missing from Fed's disclosure. But what Senator Sanders' staff estimate so far, is that 36% of the collateral pledged to the Fed's primary dealer [overnight] credit facility was merely stock — this is not allowed under the Federal Reserve Act — or bonds ranked below investment grade. Another 17% of the collateral was unrated — downright pornographic — credit or loans.

The biggest mass of low-grade/illegal collateral was pledged immediately after the September 2008 Lehman collapse, by Morgan Stanley and Merrill Lynch, which were clearly going to collapse themselves, without the Fed bailouts.