Toxic Gifts from the Fed

The U.S. Federal Reserve lent $1.2 trillion at ridiculous rates to dozens of banks from around the world from August 2007 to April 2010.

The secret was supposed to be kept for two years, as the distribution of gifts ($1.2 trillion U.S.) hides the lack of liquidity of banks and eliminates any panic moves caused by the vulnerability of their accounts.

The details of these operations were revealed by a press agency specializing in business news, Bloomberg, named after its owner, billionaire and mayor of New York City — Michael Bloomberg. This windfall is set out in detail in a document of 29,346 pages obtained by the agency under the Freedom of Information Act, which permits access to officials’ sources. It is a “scoop” that is not a scoop, since the practice of loans by the Fed in hard times has happened before. “The aristocracy of Wall Street” would be another “scoop,” for they are the great beneficiaries of the operation.

The largest U.S. banks had the largest share of loans. In the case of Goldman Sachs, saved in 2008 by taxpayers’ money, this is showing fruitful profits. But dozens of banks around the world have benefited from this bailout, from Europe to Asia. Among them the British National Party and Societe Generale, who were suffering during these times from rumors of poor results after losing a CEO (in the case of Societe Generale) as the result of an “error” of one of its traders. Today, everyone has passed the “stress test”: It publishes very positive results and ensures that all goes well in a world that could be better. That is the position sustained by Ben Bernanke, chairman of the Federal Reserve, last Friday, while the fall in employment, lowered consumption and fragility of the real estate market hit the middle classes, from employees to managers. They already have experienced the cost of austerity that many states have applied by cutting the public sector. In his speech to the annual assembly of bankers in Lordstown, Ohio, Bernanke says he has glimpsed “a prolonged period of stagnation, regardless of its public policy choices.” A notice to candidates for the presidential election: “Severe difficulties” are announced in the long term. However, he has not announced the opening of new lines of credit that financial markets were hoping for.

The toxic loans already granted at the lowest rates, without conditions of security and without obligations for medium and large enterprises to invest in employment, education and research have revived speculation on the risk of contagion among banks, exacerbating a crisis that has nothing to do with debt.