Zero Hedge: Meet the 35 Foreign Banks That Were Bailed Out by the Fed

[Hubbs]

Awesome. $350 billion for foreign institutions. Yes, I know it was in the form of loans. I don't care. This is meddling beyond belief. The whole world's economy in the hands of the Fed. Thanks, Bernanke.

The 35 companies in question:

UBS

Dexia SA

BNP Paribas

Barclays PLC

Royal Bank of Scotland Group

Commerzbank AG

Danske Bank A/S

ING Groep NV

WestLB

Handelsbanken

Deutsche Post AG

Erste Group Bank AG

NordLB

Free State of Bavaria

KBC

HSH Nordbank AG

Unicredit

HSBC Holdings PLC

DZ Bank AG

Republic of Korea

Rabobank

Sumitomo Mitsui Banking Corporation

Banco Espirito Santo SA

Bank of Nova Scotia

Mizuho Corporate Bank, Ltd.

Syngenta AG

Mitsui & Co Ltd

Bank of Montreal

Caixa Geral de Depósitos

Mitsubishi UFJ Financial Group

Shinhan Financial Group Co Ltd

Mitsubishi Corp

Aegon NV

Royal Bank of Canada

Sumitomo Corp

[Chicken Fried]

It's sad how irresponsible the government is with our money.

[Fergasun]

What about the Fed valuing the "collateral" from the banks at 10 cents on the dollar?

I hope the world thanks us for saving their financial asses... or is it all just a shell game where everyone is borrowing from everyone else?

[Hubbs]

What about the Fed valuing the "collateral" from the banks at 10 cents on the dollar?

I hope the world thanks us for saving their financial asses... or is it all just a shell game where everyone is borrowing from everyone else?

Erm... exactly what collateral are you talking about? Because the things that I've been watching show that the Fed bought assets at 100 cents on the dollar when they really were actually worth about 10 cents on the dollar.

[Fergasun]

I'm reading Denninger's front post (market-ticker.org). He's highlighting BAC getting $15B loans for $55B, $127B, $169B collateral postings. I'm guessing that is the face value of the collateral, right? He has a screencap of Wells Fargo was well and extends the argument to other banks. The fact that FRBNY was valuing the assets at 10 cents on the dollar leads him to question why the banks weren't valuing it at 10 cents a dollar on their balance sheets... I think the answer is going to be "because the suspension of mark to market rules didn't require the banks to mark it down on their balance sheets".

[SkinsHokieFan]

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/01/AR2010120106870.html?hpid=topnews

Fed aid in financial crisis went beyond U.S. banks to industry, foreign firms

The financial crisis stretched even farther across the economy than many had realized, as new disclosures show the Federal Reserve rushed trillions of dollars in emergency aid not just to Wall Street but also to motorcycle makers, telecom firms and foreign-owned banks in 2008 and 2009.

The Fed's efforts to prop up the financial sector reached across a broad spectrum of the economy, benefiting stalwarts of American industry including General Electric and Caterpillar and household-name companies such as Verizon, Harley-Davidson and Toyota. The central bank's aid programs also supported U.S. subsidiaries of banks based in East Asia, Europe and Canada while rescuing money-market mutual funds held by millions of Americans.

The biggest users of the Fed lending programs were some of the world's largest banks, including Citigroup, Bank of America, Goldman Sachs, Swiss-based UBS and Britain's Barclays, according to more than 21,000 loan records released Wednesday under new financial regulatory legislation.

The data reveal banks turning to the Fed for help almost daily in the fall of 2008 as the central bank lowered lending standards and extended relief to all kinds of institutions it had never assisted before.

Click link for rest

[Hubbs]

I'm reading Denninger's front post (market-ticker.org). He's highlighting BAC getting $15B loans for $55B, $127B, $169B collateral postings. I'm guessing that is the face value of the collateral, right? He has a screencap of Wells Fargo was well and extends the argument to other banks. The fact that FRBNY was valuing the assets at 10 cents on the dollar leads him to question why the banks weren't valuing it at 10 cents a dollar on their balance sheets... I think the answer is going to be "because the suspension of mark to market rules didn't require the banks to mark it down on their balance sheets".

Denninger has been proven right over and over again. He runs one of my go-to sites (the market-ticker you mention). He's consistently ahead of the curve. People say he's nuts, then people shut up, then people agree with him.

As for the assets, I still don't understand what you're referring to when you say that the FRBNY valued them at 10 cents of the dollar when every part of the quantitative easing program (in all of its various stages) involves buying bank assets at 100 cents on the dollar.

[Fergasun]

It was the TAF. The banks had to put up full collateral to get money. The collateral was in the form of assets. The face value of those assets in 1 transaction was $185B for a $15B loan. Remember, it was all about providing liquidity (cash). What have the banks been doing for cash? Putting up their assets as collateral for the Fed to loan them cash. I always referred to the original $1.25T Agency MBS purchase program as quantitative easing (this started in January 2009). In light of the new $600B Treasury purchase program which is QE2, that one is QE1. I'm not even sure the Fed purchased those assets at 100 cents on the dollar... but, I could be wrong about that.

The Federal Reserve has a page where they talk about the different facilities and different actions taken in the crisis. They all seem to take the form of giving out cash for collateral of some sort.

There was the... (source here is federalreserve.gov)

Commercial Paper Funding Facility: Under the CPFF, the Federal Reserve Bank of New York financed the purchase of highly rated unsecured and asset-backed commercial paper from eligible issuers via eligible primary dealers.

Primary Dealer Credit Facility: The PDCF was an overnight loan facility that provided funding to primary dealers in exchange for a specified range of eligible collateral and was intended to foster the functioning of financial markets more generally.

Term Securities Lending Facility: The program offered Treasury securities held by the System Open Market Account (SOMA) for loan over a one-month term against other program-eligible general collateral.

Term Auction Facility: Under the TAF, the Federal Reserve will auction term funds to depository institutions. All depository institutions that are eligible to borrow under the primary credit program will be eligible to participate in TAF auctions. All advances must be fully collateralized.

All those above have come to an end.

There's also the Term Asset-Backed Securities Loan Facility (TALF): Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200 billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The FRBNY will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS.

[wilsonian]

Not to worry, people. The Ben Bernank has got it under control!

http://www.youtube.com/watch?v=NZHGtbGJ16c

[Hubbs]

It was the TAF. The banks had to put up full collateral to get money. The collateral was in the form of assets. The face value of those assets in 1 transaction was $185B for a $15B loan. Remember, it was all about providing liquidity (cash). What have the banks been doing for cash? Putting up their assets as collateral for the Fed to loan them cash. I always referred to the original $1.25T Agency MBS purchase program as quantitative easing (this started in January 2009). In light of the new $600B Treasury purchase program which is QE2, that one is QE1. I'm not even sure the Fed purchased those assets at 100 cents on the dollar... but, I could be wrong about that.

They were purchased at 100 cents on the dollar. (Nobody else would have paid nearly as much.)

The Federal Reserve has a page where they talk about the different facilities and different actions taken in the crisis. They all seem to take the form of giving out cash for collateral of some sort.

The collateral was often worthless.

There was the... (source here is federalreserve.gov)

Commercial Paper Funding Facility: Under the CPFF, the Federal Reserve Bank of New York financed the purchase of highly rated unsecured and asset-backed commercial paper from eligible issuers via eligible primary dealers.

Primary Dealer Credit Facility: The PDCF was an overnight loan facility that provided funding to primary dealers in exchange for a specified range of eligible collateral and was intended to foster the functioning of financial markets more generally.

Term Securities Lending Facility: The program offered Treasury securities held by the System Open Market Account (SOMA) for loan over a one-month term against other program-eligible general collateral.

Term Auction Facility: Under the TAF, the Federal Reserve will auction term funds to depository institutions. All depository institutions that are eligible to borrow under the primary credit program will be eligible to participate in TAF auctions. All advances must be fully collateralized.

All those above have come to an end.

There's also the Term Asset-Backed Securities Loan Facility (TALF): Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200 billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The FRBNY will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS.

And we should be okay with the blatant central planning of the global economy because...?

[NavyDave]

Heck I bet you next up is helping to bail out member nations of the EU especially if Spain tanks in 2011 as predicted and some smooth talker will try to convince us that it would be irresponsible or unfair if we don't show compassion and help.

[Hubbs]

Heck I bet you next up is helping to bail out member nations of the EU especially if Spain tanks in 2011 as predicted and some smooth talker will try to convince us that it would be irresponsible or unfair if we don't show compassion and help.

You think that isn't already happening? Where do you think the IMF gets its funding?

[SnyderShrugged]

Where did the fed get the money?

[Fergasun]

The collateral was often worthless.

No. The collateral was worth 10 cents on the dollar. Hence the banks put up $150B in collateral for a $15B loan.

Federal Reserve is only "providing liquidity", remember they are the "lender of last resort".

[mcsluggo]

ok.. now that y'all have cleaned your spleens.

How much of the LOANS defaulted?

the fed provided these loans because it is the lender of last resort, and RIGHT THEN it was teh ONLY central bank that had the full confidence of the markets. The interbank market was seized up , and had total liquidity followed suit, the entire global financial system wouldve ground to a halt. In that scenario, It would've done little good to try to rescue only US banks.

Sheesh people, i honestly cannot believe what you choose to gripe about from the fall of 2008. It is the equiv of you having a dude in your house with a shotgun aimed at your head, and whining that the dude that saves you tracked mud from your garden onto your porch.

[Henry]

Yeah, I'm not an armchair economist but I am an armchair historian and in my studies I've noticed that global economic meltdowns tend to end very badly for pretty much everyone. Isn't in our best interest to try and prevent that from happening?

[Tulane Skins Fan]

As the rants continue, the WP article that SHF posted seems to show just how effective the Fed was in protecting a huge economic meltdown. It sounds, to me anyways, that if the Fed didn't take the actions it did, huge companies including GE, Caterpillar and Verizon would have gone belly up and died.

And for the free-est of free market capitalists here, I'd just point out that those companies would not have died because they weren't making good products or because the market selected them out. They would have died because the banking market was dying and credit was frozen, regardless of their own product and services.

[Hubbs]

ok.. now that y'all have cleaned your spleens.

How much of the LOANS defaulted?

the fed provided these loans because it is the lender of last resort, and RIGHT THEN it was teh ONLY central bank that had the full confidence of the markets. The interbank market was seized up , and had total liquidity followed suit, the entire global financial system wouldve ground to a halt. In that scenario, It would've done little good to try to rescue only US banks.

Sheesh people, i honestly cannot believe what you choose to gripe about from the fall of 2008. It is the equiv of you having a dude in your house with a shotgun aimed at your head, and whining that the dude that saves you tracked mud from your garden onto your porch.

Yes, that's how capitalism works. A shotgun aimed at your head. That's how I like my economy to function.

Yeah, I'm not an armchair economist but I am an armchair historian and in my studies I've noticed that global economic meltdowns tend to end very badly for pretty much everyone. Isn't in our best interest to try and prevent that from happening?

You know what's funny? Iceland had a meltdown, Ireland is doing anything it can to prevent a meltdown. The difference is a single letter and a willingness to let banks die. Guess which option is working better.

As the rants continue, the WP article that SHF posted seems to show just how effective the Fed was in protecting a huge economic meltdown. It sounds, to me anyways, that if the Fed didn't take the actions it did, huge companies including GE, Caterpillar and Verizon would have gone belly up and died.

And for the free-est of free market capitalists here, I'd just point out that those companies would not have died because they weren't making good products or because the market selected them out. They would have died because the banking market was dying and credit was frozen, regardless of their own product and services.

No, they would have died because they were dependent upon debt. Maybe we shouldn't base our entire economy on debt.

[artmonkforHOF]

That is probably the most biased report on the bailout i have seen. They make it look like the Fed had to bail out these banks in fear of them failing, which for at least two of banks listed on there is not true at all. The Bank of Montreal and the Royal Bank of Canada did not need to be bailed out, in fact they had a limited exposure. I have no idea why the Fed loaned money to the Bank of Montreal or the Royal Bank of Canada, but it was not to keep them solvent. Canadian banking laws prohibit debt ratios as large as those in the US, so there was no possible way for the Canadian banks to fail, they did see a reduction is assets, but no where near to the point of being insolvent. I would also be suspicious of some of the other banks on that list, if they got less than a billion dollars, I doubt that money was to bail them out, as they would need much more than a billion dollars to do so. The top 3, I would question, for all others this just looks like one bank (the Fed-even thought they are not really a bank) loaning money to other banks.

[Predicto]

ok.. now that y'all have cleaned your spleens.

How much of the LOANS defaulted?

the fed provided these loans because it is the lender of last resort, and RIGHT THEN it was teh ONLY central bank that had the full confidence of the markets. The interbank market was seized up , and had total liquidity followed suit, the entire global financial system wouldve ground to a halt. In that scenario, It would've done little good to try to rescue only US banks.

Sheesh people, i honestly cannot believe what you choose to gripe about from the fall of 2008. It is the equiv of you having a dude in your house with a shotgun aimed at your head, and whining that the dude that saves you tracked mud from your garden onto your porch.

Listen to the PhD economist people.

As the rants continue, the WP article that SHF posted seems to show just how effective the Fed was in protecting a huge economic meltdown. It sounds, to me anyways, that if the Fed didn't take the actions it did, huge companies including GE, Caterpillar and Verizon would have gone belly up and died.

And for the free-est of free market capitalists here, I'd just point out that those companies would not have died because they weren't making good products or because the market selected them out. They would have died because the banking market was dying and credit was frozen, regardless of their own product and services.

Yep. Liquidity loans from a central bank? Who would have thunk it? How outrageous!

---------- Post added December-2nd-2010 at 12:13 PM ----------

No, they would have died because they were dependent upon debt. Maybe we shouldn't base our entire economy on debt.

Maybe you decide that AFTER the crisis passes, rather than burning down your entire house because the plumbing needs an upgrade.

[twa]

Maybe you decide that AFTER the crisis passes, rather than burning down your entire house because the plumbing needs an upgrade.

Instead you install gold plated plumbing insuring you cannot afford another home?

[Predicto]

Instead you install gold plated plumbing insuring you cannot afford another home?

If your house is on fire, step one is to put out the fire. Everything else can come later.

Our house was on fire in 2008. The Fed response may not have been perfect, but it was necessary. It put out the fire.

[mcsluggo]

Yes, that's how capitalism works. A shotgun aimed at your head. That's how I like my economy to function.

uh... Bernanke was NOT the guy with the shotgun.

You know what's funny? Iceland had a meltdown, Ireland is doing anything it can to prevent a meltdown. The difference is a single letter and a willingness to let banks die. Guess which option is working better.

I actually am not sure what you are saying here? Iceland and Ireland are weathering the crisis better than the US?

No, they would have died because they were dependent upon debt. Maybe we shouldn't base our entire economy on debt.

great.. the solution is zero financial sector. If your ideas is so good, OBVIOUSLY you should've built up a level of cash sufficient to impliment it before you get started.

[pjfootballer]

Think of it. All that money could have gone back into Unemployment Compensation funds for each state or into programs to help create new jobs.

[twa]

If your house is on fire, step one is to put out the fire. Everything else can come later.

Our house was on fire in 2008. The Fed response may not have been perfect, but it was necessary. It put out the fire.

Give up on the plumbing analogy?

Sometimes a controlled burn is a good strategy,as is not wasting resources...but I'm a firebug.