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Author Topic: "...The Fed’s $600 Billion Stealth Bailout of Foreign Banks Continues..  (Read 2294 times)
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WhiskeyGirl
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« on: June 13, 2011, 12:16:58 AM »

"Zero Hedge: The Fed’s $600 Billion Stealth Bailout of Foreign Banks Continues at the Expense of the Domestic Economy, or Explaining Where All the QE2 Money Went"

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Courtesy of the recently declassified Fed discount window documents, we now know that the biggest beneficiaries of the Fed’s generosity during the peak of the credit crisis were foreign banks, among which Belgium’s Dexia was the most troubled, and thus most lent to, bank. Having been thus exposed, many speculated that going forward the US central bank would primarily focus its “rescue” efforts on US banks, not US-based (or local branches) of foreign (read European) banks: after all that’s what the ECB is for, while the Fed’s role is to stimulate US employment and to keep US inflation modest. And furthermore, should the ECB need to bail out its banks, it could simply do what the Fed does, and monetize debt, thus boosting its assets, while concurrently expanding its excess reserves thus generating fungible capital which would go to European banks. Wrong. Below we present that not only has the Fed’s bailout of foreign banks not terminated with the drop in discount window borrowings or the unwind of the Primary Dealer Credit Facility, but that the only beneficiary of the reserves generated were US-based branches of foreign banks (which in turn turned around and funnelled the cash back to their domestic branches), a shocking finding which explains not only why US banks have been unwilling and, far more importantly, unable to lend out these reserves, but that anyone retaining hopes that with the end of QE2 the reserves that hypothetically had been accumulated at US banks would be flipped to purchase Treasurys, has been dead wrong, therefore making the case for QE3 a done deal. In summary, instead of doing everything in its power to stimulate reserve, and thus cash, accumulation at domestic (US) banks which would in turn encourage lending to US borrowers, the Fed has been conducting yet another stealthy foreign bank rescue operation, which rerouted $600 billion in capital from potential borrowers to insolvent foreign financial institutions in the past 7 months. QE2 was nothing more (or less) than another European bank rescue operation!

Source here - http://www.theblaze.com/stories/zero-hedge-the-feds-600-billion-stealth-bailout-of-foreign-banks-continues-at-the-expense-of-the-domestic-economy-or-explaining-where-all-the-qe2-money-went/

Original broken web link - http://www.zerohedge.com/article/exclusive-feds-600-billion-stealth-bailout-foreign-banks-continues-expense-domestic-economy-

No job for Americans, debasing the dollar, no hope for the future...
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WhiskeyGirl
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« Reply #1 on: June 13, 2011, 12:23:59 AM »

The Business Insider has more here - http://www.businessinsider.com/where-did-all-of-the-qe2-money-go-2011-6  (Including many charts)

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What is the first notable thing about the above chart is that while cash levels in US and US-based foreign-banks correlate almost perfectly with the Fed's reserve balances, as they should, there is a notable divergence beginning around May of 2010, or the first Greek bailout, when Europe was in a state of turmoil, and when cash assets of foreign banks jumped by $200 billion, independent of the Fed and of cash holdings by US banks. About 6 months later, this jump in foreign bank cash balances had plunged to the lowest in years, due to repatriated fungible cash being used to plug undercapitalized local operations, with total cash just $265 billion as of November 17, just as QE2 was commencing. Incidentally, the last time foreign banks had this little cash was April 2009... Just as QE1 was beginning. As to what happens next, the first chart above says it all: cash held by foreign banks jumps from $308 billion on November 3, or the official start of QE2, to $940 billion as of June 1: an almost dollar for dollar increase with the increase in Fed reserve balances. In other words, while the Fed did nothing to rescue foreign banks in the aftermath of the first Greek crisis, aside from opening up FX swap lines, one can argue that the whole point of QE2 was not so much to spike equity markets, or the proverbial "third mandate" of Ben Bernanke, but solely to rescue European banks!

Imagine!  Nothing for Americans.  Just like TARP had nothing for Main Street - the little people continue to lose there homes.

I wonder how many of those European banks have little consumer exposure?  How many cater to the wealthy?  The common man?


Quote
That's right, out of 20 Primary Dealers, 12 are.... foreign. And incidentally, the reason why we added the (if any) above, is that since this cash is fungible between on and off-shore operations, what happened is that the $600 billion in cash was promptly repatriated and used by domestic branches of foreign banks to fill undercapitalization voids left by exposure to insolvent European PIIGS and for all other bankruptcy-related capital needs. And one wonders why suddenly German banks are so willing to take haircuts on Greek bonds: it is simply because courtesy of their US based branches which have been getting the bulk of the Fed's dollars in 1 and 0 format, they suddenly find themselves willing and ready to face the mark to market on Greek debt from par to 50 cents on the dollar. And not only Greek, but all other PIIGS, which will inevitably happen once Greece goes bankrupt, either volutnarily or otherwise. In fact, the $600 billion in cash that was repatriated to Europe will mean that European banks likely are fully covered to face the capitalization shortfall that will occur once Portugal, Ireland, Greece, Spain and possibly Italy are forced to face the inevitable Event of Default that will see their bonds marked down anywhere between 20% and 60%. Of course, this will also expose the ECB as an insolvent central bank, but that largely explains why Germany has been so willing to allow Mario Draghi to take the helm at an institution that will soon be left insolvent, and also explains the recent shocking animosity between Angela Merkel and Jean Claude Trichet: the German are preparing for the end of the ECB, and thanks to Ben Bernanke they are certainly capitalized well enough to handle the end of Europe's lender of first and last resort. But don't take our word for this: here is Stone McCarthy's explanation of what massive reserve sequestering by foreign banks means: "Foreign banks operating in the US often lend reserves to home offices or other banks operating outside the US. These loans do not change the volume of excess reserves in the system, but do support the funding of dollar denominated assets outside the US....Foreign banks operating in the US do not present a large source of C&I, Consumer, or Real Estate Loans. These banks represent about 16% of commercial bank assets, but only about 9% of bank credit. Thus, the concern that excess reserves will quickly fuel lending activities and money growth is probably diminished by the skewing of excess reserve balances towards foreign banks."

For some reason, I think this mean the Greeks will still be able to retire in their Ponzi scheme social welfare system at 45...Americans will be working until their 80 to pay for everyone else...
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
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WhiskeyGirl
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« Reply #2 on: June 13, 2011, 12:26:45 AM »

Here is the best of that article -

That said, of all of the above, the one we are most looking forward to is the impeachment of Ben Bernanke: because if there is one definitive proof of the Fed abdicating any and all of its mandates, and merely playing the role of globofunder explicitly at the expense of US consumers and borrowers, not to mention lackey for the banking syndicate, this is it.

Read more: http://www.zerohedge.com/article/exclusive-feds-600-billion-stealth-bailout-foreign-banks-continues-expense-domestic-economy-#ixzz1P7vCbatZ


And for some reason, despite the fact that Americans continue to lose their jobs, their homes, and their hope for the future...

Obama and Washington continue to give the Fed more authority and NO oversight.

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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
WhiskeyGirl
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« Reply #3 on: June 16, 2011, 02:48:03 PM »

Why do Democrats keep calling for taxing the rich?  What of the global wealthy that are getting rich on the back of Americans?  Future generations?

Why aren't Democrats demanding that Uncle Ben STOP GIVING AWAY AMERICAN MONEY?  Why isn't Obama DEMANDING the same?

Why is the only solution to raise taxes on America's working class?  The hard working folks who make things happen?

Milwaukee had a scandal about a family making over $200,000 a year, for many years and STILL filing for bankruptcy.  Why are Democrats going after these folks?

Why aren't they JUST CUTTING OFF THE MONEY FOR THE GLOBAL WEALTHY BANKS THAT NEVER SEEM TO GET POOR?  Who are those account holder that benefit on the backs of generations of Americans?  Cause stagflation?  Higher unemployment and underemployment?

Imagine how much money Americans would have in their pockets if they didn't have to pay bankers?  All that DEBT SERVICE that Tim is always complaining about?

What's wrong in Washington today????
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
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