AND THIS IS ONLY $3.3 TRILLION OF THE $28.3 TRLLION UP TO NOVEMBER LAST YEAR.IT MUST BE $50-60 TRILLION GIVIN OUT BY NOW.
THE EURO NEEDS A FISCAL UNION-LEARN FROM HISTORY
http://shadowfed.org/wp-content/uploads/2010/10/Bordo-Euro-Needs-A-Fiscal-Union.pdf
Usage of Federal Reserve Credit and Liquidity Facilities BY FED DEC 1,10
http://www.federalreserve.gov/newsevents/reform_transaction.htm
This section of the website provides detailed information about the liquidity and credit programs and other monetary policy tools that the Federal Reserve used to respond to the financial crisis that emerged in the summer of 2007. These programs fall into three broad categories--those aimed at addressing severe liquidity strains in key financial markets, those aimed at providing credit to troubled systemically important institutions, and those aimed at fostering economic recovery by lowering longer-term interest rates.The emergency liquidity programs that the Federal Reserve set up provided secured and mostly short-term loans. Over time, these programs helped to alleviate the strains and to restore normal functioning in a number of key financial markets, supporting the flow of credit to businesses and households. As financial markets stabilized, the Federal Reserve closed most of these programs. Indeed, many of the programs were intentionally priced to be unattractive to borrowers when markets are functioning normally and, as a result, wound down as market conditions improved. The programs achieved their intended purposes with no loss to taxpayers.The Federal Reserve also provided credit to several systemically important financial institutions. These actions were taken to avoid the disorderly failure of these institutions and the potential catastrophic consequences for the U.S. financial system and economy. All extensions of credit were fully secured and are in the process of being fully repaid.
Finally, the Federal Reserve provided economic stimulus by lowering interest rates. Over the course of the crisis, the Federal Open Market Committee (FOMC) reduced its target for the federal funds rate to a range of 0 to 1/4 percent. With the federal funds rate at its effective lower bound, the FOMC provided further monetary policy stimulus through large-scale purchases of longer-term Treasury debt, federal agency debt, and agency mortgage-backed securities (agency MBS). These asset purchases helped to lower longer-term interest rates and generally improved conditions in private credit markets.The links to the right provide detailed information about the programs that were established in response to the crisis. Details for each loan include: the borrower, the date that credit was extended, the interest rate, information about the collateral, and other relevant terms. Similar information is supplied for swap line draws and repayments. Details for each agency MBS purchase include: the counterparty to the transaction, the date of the transaction, the amount of the transaction, and the price at which each transaction was conducted. The transaction data are provided in compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Federal Reserve will revise the data to ensure that they are accurate and complete. No rules about executive compensation or dividend payments were applied to borrowers using Federal Reserve facilities. Executive compensation restrictions were imposed by statute on firms receiving assistance through the U.S. Treasury's Troubled Asset Relief Program (TARP). Dividend restrictions were the province of the appropriate supervisors and were imposed by the Federal Reserve on bank holding companies in that role, but not because of borrowing through the facilities discussed here.Additional information about the Federal Reserve's credit and liquidity programs is available on the Credit and Liquidity Programs and the Balance Sheet section.
http://www.federalreserve.gov/monetarypolicy/bst.htm
Fed Names Recipients of $3.3 Trillion in Crisis Aid
December 01, 2010, 12:51 PM ESTBusinessweek to Business Exchange By Craig Torres and Scott Lanman(Updates with names in second paragraph.)
Dec. 1 (Bloomberg) -- The Federal Reserve, under orders from Congress, today named the counterparties of about 21,000 transactions from $3.3 trillion in aid provided to stem the worst financial panic since the Great Depression.Bank of America Corp. and Wells Fargo & Co. were among the biggest borrowers from one program, the Term Auction Facility, with as much as $45 billion apiece. Some aid went to U.S. units of foreign institutions, including Switzerland’s UBS AG, France’s Societe Generale and Germany’s Dresdner Bank AG. The Fed posted the data on its website to comply with a provision in July’s Dodd-Frank law overhauling financial regulation.The Federal Reserve followed sound risk-management practices in administering all of these programs, incurred no credit losses on programs that have been wound down and expects to incur no credit losses on those that remain, the central bank said in a statement in Washington.Even so, the release may heighten political scrutiny of the central bank already at its most intense in three decades. The Fed’s Nov. 3 decision to add $600 billion of monetary stimulus has sparked a backlash from top Republicans in Congress, who said in a Nov. 17 letter to Chairman Ben S. Bernanke that the action risks inflation and asset-price bubbles.These disclosures come at a politically inopportune moment for the Fed, Sarah Binder, a senior fellow at the Brookings Institution in Washington whose research focuses on Congress’s relationship with the Fed, said before the release. Just when Chairman Bernanke is trying to defend the Fed from Republican critics of its asset purchases, the Fed’s wounds from the financial crisis are reopened.
Six Programs
The information, which also includes the amounts of transactions and interest rates charged, spans six loan programs as well as currency swaps with other central banks, purchases of mortgage-backed securities and the rescues of Bear Stearns Cos. and American International Group Inc.The data detail the breadth of central bank support that reached beyond banks to companies such as General Electric Co., which accessed a Fed program 12 times for a total of $16 billion in commercial paper. Lawmakers demanded disclosure, over the Fed’s initial objections, as U.S. central bankers pushed beyond their traditional role of backstopping banks. The Fed bought short-term IOUs from corporations, risky assets from Bear Stearns and more than $1 trillion in U.S. housing debt.Companies’ participation in the programs reflected the severe market disruptions during the financial crisis and generally did not reflect participants’ financial weakness,the Fed said today in its statement.
Dollar Squeeze
The presence of foreign banks in the program underscores the squeeze in dollar liquidity after the collapse of Lehman Brothers Holdings Inc. on Sept. 15, 2008. UBS, Switzerland’s largest bank, was the biggest borrower from the Commercial Paper Funding Facility, tapping the program 11 times for $74.5 billion.The emergency programs included the Term Asset-Backed Securities Loan Facility, which has supported billions of dollars in credit to small businesses, credit card borrowers, and students, and the Term Auction Facility, which helped banks get cheaper funding.
Bernanke pushed the boundaries of the Fed’s powers, using section 13(3) of the Federal Reserve Act, which allowed the central bank to aid non-banks under unusual and exigent circumstances.In some facilities, the Fed engaged in non- recourse lending, meaning it loaned against collateral alone and took a greater risk of loss.
Risk Exposures
By moving into the world of non-recourse loans, they started to accept risk exposures that the private sector was no longer capable of maintaining, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. That effectively turned the Fed into an asset warehouse.Congress excluded one Fed lending program from disclosure, the discount window, which is the subject of a 2008 lawsuit filed by Bloomberg LP, parent of Bloomberg News, against the central bank. A group of banks is appealing to the Supreme Court over lower-court decisions ordering the Fed to identify loan recipients. The program peaked at $110.7 billion in October 2008.We see this not as the end of a process but really a significant step forward in opening the veil of secrecy that exists in one of the most powerful agencies in government, Senator Bernard Sanders, the Vermont Independent who wrote the provision on Fed disclosure, said to reporters Nov. 17.
Request Rebuffed
Sanders said he was motivated to use legislation to force the Fed to reveal borrowers after Bernanke rebuffed his request to identify the firms.Given the size of these commitments, it is incomprehensible that the American people have not received specific details about them,” Sanders said in a letter to Bernanke on Feb. 4, 2009.The Federal Reserve does not release specific information regarding the borrowings of individual institutions from our lending facilities, Bernanke said in a reply to Sanders. The approach is completely consistent with the long-standing practice of central banks.Vincent Reinhart, a former Fed official, disagreed with Bernanke’s argument in the letter. The central bank assumed a greater burden of disclosure by taking on a fiscal policy role, such as acquiring $30 billion of assets to ease JPMorgan Chase & Co.’s purchase of Bear Stearns in 2008, said Reinhart, who headed the Fed’s Division of Monetary Affairs.
No National Principle
There is no national principle about hiding fiscal policy decisions,said Reinhart, now a resident scholar at the American Enterprise Institute in Washington.At a time of stress, the Federal Reserve was willing to provide subsidies to a critically important area of the economy -- the financial system,Reinhart said. But the public should know how much the Federal Reserve provided and to who.A year after his 2009 correspondence with Sanders, Bernanke said in House Financial Services Committee testimony the Fed would agree to reveal the names of borrowers of emergency facilities with a sufficiently long lag. Once again, he said that the confidentiality of the discount window must be maintained.Today’s information relates to aid from Dec. 1, 2007, through July 21, 2010, when President Barack Obama signed Dodd- Frank into law. The act also requires the Fed, after a two-year delay, to identify firms that, following the law’s passage, borrow through its discount window and participate in its purchases or sales of assets such as mortgage-backed securities and Treasuries.
Emergency Powers
The Dodd-Frank legislation has also limited the Fed’s emergency lending powers from now on to programs with broad- based eligibility, curtailing bailouts of individual institutions.You have to balance the different considerations, said Roberto Perli, managing director at International Strategy & Investment Group in Washington and a former Fed Board staff member. They crossed a line, but what would have been the alternative? You can’t have a huge run on money funds. The situation was very delicate. The alternative would have been a lot worse.--Editors: Christopher Wellisz, James Tyson To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net. Scott Lanman in Washington at slanman@bloomberg.net;To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.
Europe pins hopes on ECB as crisis fears spread By Luke Baker and John O'Donnell - DEC 1,10
BRUSSELS (Reuters) – The European Central Bank is under pressure to unveil new steps to stabilize the euro zone when it meets on Thursday as the bloc battles a crippling debt crisis that has stoked contagion fears in the U.S. and Asia.An 85 billion euro ($110.7 billion) EU/IMF rescue of Ireland last weekend and public assurances from leaders that the euro will be defended at any cost have failed to impress investors who are targeting Portugal, Spain and Italy in a test of the European Union's resolve and crisis-fighting resources.A day after investors pushed the risk premiums on Spanish and Italian bonds to euro lifetime highs, markets steadied as speculation grew the ECB could agree to step up its purchases of government debt and a U.S. official told Reuters Washington would support boosting an EU rescue facility via IMF funds.Speaking in Brussels, European Commission President Jose Manuel Barroso said he had confidence the ECB would take whatever action was needed to protect the stability of the single currency bloc.I'm sure the ECB is analyzing the current situation and that it will take the decisions necessary to guarantee the financial stability of the euro zone,Barroso said.The EU's Economic and Monetary Affairs Commissioner Olli Rehn appeared to pass the baton to the ECB, saying recent EU actions provided a sound basis for further stabilization measures by the central bank.
HIGHLY CONTROVERSIAL
The ECB launched a bond purchase program in May after Greece was bailed out, but it has been highly controversial within the bank and has been used only erratically.
Influential Bundesbank head Axel Weber has called publicly for the program to be scrapped and fellow ECB members have criticized the U.S. Federal Reserve's decision to buy $600 billion of U.S. debt in a policy known as quantitative easing.Any sense from fiercely independent central bankers that they were being bullied by EU politicians into making bond purchases could further deepen their opposition to such a step.With the euro under threat, however, they may decide they have no other choice.In recent days, economists have urged the ECB to throw out its rule book and do all it can to save the euro, particularly since governments seem to be running out of ideas for restoring confidence in their monetary union.There is a feeling that things have got to a point where the ECB has to do more, said Gilles Moec, an economist at Deutsche Bank.Reflecting global concern about the euro zone crisis, the U.S. Treasury announced late on Tuesday it would send an envoy to Europe this week to discuss the turmoil with governments in Berlin, Madrid and Paris.A U.S. official told Reuters in Brussels Washington stood ready to support an expansion of the bloc's current 750 billion euro rescue mechanism via extra funds from the International Monetary Fund, a step German officials have said they oppose.
It is up to the Europeans, the U.S. official said. We will certainly support using the IMF in these circumstances.The comments helped push the euro up to $1.3130 in late European trading after three successive days of losses which took it to a 10-week low against the dollar on Tuesday.The premium investors demand to hold Portuguese, Spanish and Italian bonds instead of German benchmarks fell and European bank stocks rebounded, with Spain's Banco Santander and BBVA up more than 7 percent after the Spanish government announced new steps to reduce the national debt. Debt auctions in Portugal and Germany, however, showed investors remain nervous. Lisbon's borrowing costs surged in a 12-month bill auction and a German five-year note sale drew the weakest demand in half a year.
Manufacturing data underscored the economic divergences plaguing Europe.Citigroup's chief economist said this week euro zone turmoil might be the opening act of a global sovereign debt crisis that could infect the United States and Japan.EU plans to make private bond holders bear some of the pain from any sovereign debt restructuring after mid-2013 have led investors to reassess the risk of putting their money in the government bonds of high-debt countries.
LIMITED OPTIONS
Strong action by the ECB is one of a small number of unattractive options for stopping the rot, given divisions among European governments over how to respond.
Germany has resisted pressure from countries such as France to turn the euro zone into a fiscal union, a step that could help the bloc address its economic imbalances, but would require members to sacrifice sovereignty for the good of the group. Chancellor Angela Merkel is also skeptical about putting up more funds for bailouts, concerned that German taxpayers could end up underwriting the rescues of countries her government believes have become targets because of economic mismanagement.Pressure from Germany's partners is mounting. Portugal's Treasury Secretary Carolos Pina told Reuters the EU needed to deepen its budget and create a European Treasury to defend the euro, a move that would be anathema to Berlin.
(Writing by Noah Barkin; Editing by Andrew Dobbie)
Ireland discloses bailout deal details By David Stringer, Associated Press – DEC 1,10
DUBLIN – Ireland must consult the IMF and European authorities over any major change to its economic policy, according to documents disclosed Wednesday outlining details of the country's international bailout.Finance minister Brian Lenihan said Ireland had also been set quarterly targets for its recovery under the deal for up to euro67.5 billion ($89 billion) in international loans.The documents show the country had promised to take any corrective actions necessary to fix its ravaged economy in order to win the deal.We have been through a traumatic two years. Of course we would have preferred to avoid to resort to external assistance, but we can emerge from it a stronger and fitter economy, Lenihan told Ireland's parliament.After making the documents public, Lenihan said the bailout requires the government to consult with the European Commission, the European Central Bank and the IMF about the adoption of policies that are not consistent with this memorandum.The documents show that every week government departments will supply regular data on the state of Ireland's finances to authorities offering the country loans.Under the deal, Ireland has pledged to sell off its stakes in the country's crippled banks "within the shortest timeframe possible.Prior to the bailout, Ireland had already committed at least euro45 billion to bailing out five banks. The deal provides an immediate euro10 billion to inject into the cash-strapped lenders.The reason we had to seek external assistance is because the problems in our banking system simply became too big for this state to handle on its own, Lenihan said.
However, he told lawmakers they would not have a chance to vote to approve Ireland's acceptance of the bailout. These supporting documents do not represent international agreements and do not require the approval of the Dail," he said, referring to the country's parliament.Critics have charged prime minister Brian Cowen with meekly accepting a deal which is too costly — Ireland will pay an average of 5.8 percent on its loans — and which they say prevents future governments from altering key elements.Ireland will hold elections early next year, when Cowen's Fianna Fail party is expected to be ousted.Lenihan said the government had no option but to accept the terms. Without this program, our ability to fund the payments to social welfare recipients, the salaries of our nurses, our doctors, our teachers, our (police) ... would have been extraordinarily limited and highly uncertain, he said.Under the terms of the bailout, Ireland must use euro17.5 billion of its own cash and pension reserves to shore up its public finances.Opponents say that, in effect, hard-pressed taxpayers will be forced to carry the costs of the government's attempted bailout of its imploded banking sector.Lenihan also confirmed he would soon announce legislation setting out the burden to be shared by junior debt holders in Irish Nationwide and Anglo Irish Bank.Cowen said Sunday that European authorities had rejected the idea of senior bondholders taking a hit under the bailout.Earlier, he defended his plan to cut the country's minimum wage by one euro (US$1.30) from the present rate of euro8.65 (US$11.30) per hour, saving it would help save jobs. Last week, he outlined a program of deep cuts and tax hikes totaling at least euro15 billion ($20.5 billion), intended to help restore Ireland's deficits to the euro-zone limit of 3 percent of GDP from its current postwar European record of 32 percent.
On Tuesday, national football team manager Giovanni Trapattoni — an Italian — agreed to cut his own euro1.8 million ($2.4 million) salary to help out the country's struggling football authority.Official data — also released Wednesday — showed Ireland's unemployment rate fell slightly to 13.5 percent over the last month — although new job losses are expected as the austerity measures bite. The Central Statistics Office said the number of people claiming unemployment benefits — which also includes payments to low income workers — was 425,002, also slightly down on October.However, the number of benefit claimants had risen 2.8 percent over the last 12 months.Opposition legislator Richard Bruton of the Fine Gael party said the fall in benefit claimants was simply evidence more people were leaving Ireland to find work Investors, however, showed some support for Cowen's plans as yields on Ireland's 10-year bonds eased to 8.959 percent Wednesday from 9.219 percent on Tuesday.
David Walker and financial boondoggles
By hollyonthehill
David Walker, former Comptroller General of the United states, was in town recently to talk at Senator Orrin Hatch’s Economic Summit.Walker served as Comptroller General and head of the Government Accountability Office (GAO) from 1998 to 2008. Appointed by President Bill Clinton, his tenure as the federal government’s chief auditor spanned both Democratic and Republican administrations. Normally a 15-year position, Walker stepped down after ten years when he was personally recruited by Peter G. Peterson, co-founder of the Blackstone Group, and former Secretary of Commerce to lead his new foundation. The foundation distributed the film I.O.U.S.A. that looks at the alarming financial situation we find ourselves in.Walker has compared the present-day United States with the Roman Empire in its decline, saying the U.S. government is on a burning platform of unsustainable policies and practices with fiscal deficits, expensive overcommitments to government provided health care, swelling Medicare and Social Security costs, the enormous expense of a prospective universal health care system, immigration, and overseas military commitments threatening a crisis if action is not taken soon.In 2007, Walker called the Medicare Part D program probably the most fiscally irresponsible piece of legislation since the 1960s. I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan, he continued but our own fiscal irresponsibility.
I’m going to show you some numbers…they’re all big and they’re all bad, he told CBS. You know the American people, I tell you, they are absolutely starved for two things: the truth, and leadership. What’s going on right now is we’re spending more money than we make…we’re charging it to a credit card…and expecting our grandchildren to pay for it. And that’s absolutely outrageous.He was clearly able to read the writing on the wall when he continued: The fact is, is that we don’t face an immediate crisis. And, so people say, What’s the problem? The answer is, we suffer from a fiscal cancer. It is growing within us. And if we do not treat it, it could have catastrophic consequences for our country.The cancer, Walker says, are massive entitlement programs we can no longer afford.It’s the number one fiscal challenge for the federal government, it’s the number one fiscal challenge for state governments and it’s the number one competitive challenge for American business.In an ironic twist, Senator Hatch voted for Medicare Part D.
