Federal Reserve loaned $7.77 trillion to Wall St Firms

[Churper]

You may have remembered the number was $16 trillion back in July when news outlets incorrectly picked up on the GAO's audit of the Fed.

Bloomberg today has done their own analysis which is much more readable for the public. A GAO Audit Report is best understood by a bureaucrat or an auditor.

http://www.bloomberg.com/news/2011-1...in-income.html

Bloomberg has some interesting analysis and reporting.

Had congress while debating Dodd Frank had known how much money Wall St was given via TARP and the Federal Reserve the legislation could have actually done something good for the economy like break up the banks and reinstate glass steagall.

Secrecy

The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.

Secondly, according to the Federal Reserve Commerical Banks held $3.8 trillion in mortgages in the 4th Quarter 2008 but yet needed to borrow nearly twice what they owed? I think this is vindication that the economy was brought to its knees by banker speculation brought on by Wall St greed.

[Thane36425c]

Wall Street isn't what it used to be. I won't go into the full history, but suffice it to say that for a long time it was dominated by smaller investors, many of them buying stocks in companies that paid dividends. They didn't care about the stock price increasing so long as the company kept paying dividends.

US tax law changed at one point and made dividends less attractive to companies who then focused on increasing stock price instead. That changed the whole nature of the game by making the market of greater interest to speculators (it also caused companies to do things like shift production overseas to cut costs and create an artificial profit increase and thus boost stock prices).

What we have now is a situation where 85% of the value of the market is controlled by about 1% of the stockholders. These are the really rich, big funds and sovereign wealth funds. Much of the trading is carried out by computers now that look at moment to moment price fluctuation trying to grab that bit of profit based on these changes.

So, the system is now one of gambling, speculating computers rather than long-term investors seeking stable dividends. Of course, the computers are making money for real humans, my point being that the computers control more and more of the trading so trades can be done faster and more often.

As to why so much was paid out to them is another matter.

[Churper]

Originally Posted by Thane36425c

US tax law changed at one point and made dividends less attractive to companies who then focused on increasing stock price instead. That changed the whole nature of the game by making the market of greater interest to speculators (it also caused companies to do things like shift production overseas to cut costs and create an artificial profit increase and thus boost stock prices).

As a person whose been forced to study contempory tax law I'm curious to understand how it was more appealing to corporations in the past as it is now. I seem to remember that dividends on subsidaries are 100% tax deductible while on companies over 20% owned are 80% deductible and companies less than 20% owned are 70% deductible. It seems now that a 70% deduction on income dervied from stock market dividends is very profitable if you found the right company.

[Thane36425c]

Its been a while since I read about the specifics. What I remember is that after the tax law change, companies started dropping dividends and those that kept them lowered them, though certainly there are exceptions. It was at that point that stock price became the driving concern for corporations.

There are other factors at play as well, however, none the least tying executive bonuses to stock price and giving free stock, lots of it, as part of their package. That, along with the golden parachute and lack of loyalty to the company, made manipulating the stock price very attractive since there was no real downside.

[Churper]

Originally Posted by Thane36425c

Its been a while since I read about the specifics. What I remember is that after the tax law change, companies started dropping dividends and those that kept them lowered them, though certainly there are exceptions. It was at that point that stock price became the driving concern for corporations.

It's not that I doubt you personally but I found little in the way supporting this argument but also little to suggest otherwise. I'll have to look into another time because I'm simply out of search terms.

There are other factors at play as well, however, none the least tying executive bonuses to stock price and giving free stock, lots of it, as part of their package. That, along with the golden parachute and lack of loyalty to the company, made manipulating the stock price very attractive since there was no real downside.

Agency Theory. I agree. You would think that after all the firms exploded on Wall St and it was discovered that the financial statements had been manipulated by management for their own self interests, the boards of some of these companies would see tying performance so heavily into pay can lead the managers to go against the interests of shareholders.

There has to be better metrics to base pay on then stock price and EPS.

[Dat1111]

The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.

Rofl Still blaming the Banks for the Government Bailouts?

Last time I checked The Government FORCED some banks to take money to lend out to unfreeze the market.. That was at the core..

For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.”

Fannie may/Freddie Mac held 56 PERCENT of TOTAL US DEBT in 2003.. Isnt that Un-American.. In the end its the GOVERNMENT that put the money out there not the Banks. You can complain all you want but in the end its the GOVERNMENT that did it.

[Aquina1300]

I would care about this if they didn't also give another six billion to Fannie and Freddie a couple of weeks ago. Almost half a trillion has been shoveled into Fannie and Freddie since September of 2008. Freddie and Fannie caused the Housing Bubble and the economic collapse, not wall street. Freddie and Fannie lied. Freddie and Fannie committed fraud. Freddie and Fannie bought powerful congressmen and Senators and frankly, the White House: Chris Dodd, chuck Schumer, Hillary Clinton, Barney Frank (whose boyfriend was the top exec at Fannie), Harry Reid, Jamie Gorelick, Rahm Emanuel, Valerie Jarreth and Barack Obama.

This story would matter to me more, if Democrats would Acknowledge that Tony Rezko has been found guilty via Blagovich and Rezko is deeply linked to all of Obama's real estate dealings since 2004.

If you want to kill the undead blood sucker, drive a stake through Fannie and Freddie.

[Churper]

It seems like everytime I put up to date information that Wall St received the overwhelming bulk of the bailouts some people just can't let that influence their feelings.

I don't have the desire for repeat arguments and sadly I can't reach them all.

[Vladimir]

I was just reading the bloomberg article this morning. I suggest anyone that cares anything about it to read this article. Very well done.

http://www.bloomberg.com/news/2011-1...in-income.html

[Thane36425c]

Originally Posted by Vladimir

I was just reading the bloomberg article this morning. I suggest anyone that cares anything about it to read this article. Very well done.

http://www.bloomberg.com/news/2011-1...in-income.html

Good find. Roll over that chart like it says and look at all the foreign banks that got handouts courtesy of the US taxpayer.