The Eurozone debt crisis has replaced the U.S. financial crisis as the disaster du jour
. But make no mistake: U.S. taxpayers will be paying the tab for the U.S. crisis for years.
That's evidently not true of the banking sector, however, whose massive financial-crisis windfall is just now coming to light.
In its January issue, Bloomberg Markets
that - at the March 9, 2009 nadir of the financial crisis - the U.S. Federal Reserve had committed $7.77 trillion to rescuing the American financial system. That total was more than half the value of all that was produced in the U.S. economy for that entire year.
While this was going on however, it was a deep, dark secret. The Fed never let on, for instance, that American banks were in such deep trouble that they required a combined $1.2 trillion on Dec. 8, 2008 - "their neediest day," Bloomberg
But here's the best part: Many of the biggest banks have ended up doing great as a result of the central bank's largesse.
Here's why: Because these "emergency" Fed loans gave banks access to ultra-low (well-below-market) interest rates between August 2007 and April 2010, banks worldwide were able to earn an estimated $13 billion
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, told Bloomberg
that banks seemed to have it both ways.
Banks "were either in bad shape or taking advantage of the Fed giving them a good deal," he said. "The former contradicts their public statements. The latter - getting loans at below-market rates during a financial crisis - is quite a gift."
Shah Gilani, a financial-crisis expert
and Money Morning
columnist who edits the free Wall Street Insights & Indictments newsletter
, put it more simply: "The average American has no idea how protected the big banks in this country really are. Maybe that's because the biggest bank in the world is the U.S. Federal Reserve. And it happens to be a creation of - and 100% beholden to - the banks that it is a master shill for. It also lies to us and covers up Wall Street's misdeeds."
What follows is a "power ranking" of the 20 banks that saw their outstanding loans peak at more than $25 billion - and some insight on how this Fed lending enabled Wall Street to profit, even as Main Street suffered.
Click here to continue reading...