Bail-out Bombshell: Fed "Emergency" Bank Rescue Totaled $29 Trillion Over Three Years
Speculation about the the Fed’s actions during the financial crisis has made headlines on and off again over the last several years. The latest drama occurred on November 27 when Bloomberg published an article, “ Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress ," which gives an account of the news agency’s struggle to bring to light the details of the Fed’s emergency programs. Bloomberg throws out some very large numbers, revealing that as of March 2009, the Fed lent, spent, or committed $7.77 trillion worth of aid to the financial system and that banks used the low interest rates charged on these loans to make an estimated $13 billion in income.
On December 6, the Fed struck back, issuing a four page unsigned memo intended to correct recent “egregious errors and mistakes” found in various reports of its emergency lending facilities. The Fed argues that the “total credit outstanding under liquidity programs was never more than about $1.5 trillion.” While Bloomberg wasn’t mentioned explicitly in the Fed memo, it was fairly clear to whom the response was directed. The following day Bloomberg defended its reporting, and the Wall Street Journal’s David Wessel came to the Fed’s defense, characterizing Bloomberg’s methodology as a “great story,” but ultimately not “true.”
All this may sound like controversy, but it’s little more than a tempest in a teacup.
Here’s the hurricane: In reality, no less than $29.616 trillion is the total emergency assistance provided by the Fed to foreign and domestic entities during the Global Financial Crisis. Let’s repeat that: $29 trillion. This astounding number is over twice U.S. gross domestic product, the nominal value of all goods and services produced for the year 2010. This is the total of the bailout as calculated by Nicola Matthews and myself as part of the Ford Foundation project, A Research And Policy Dialogue Project On Improving Governance Of The Government Safety Net In Financial Crisis . We will be presenting the results of our analysis in a series of papers published by the Levy Economics Institute, the first of which, “29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient,” is already available here.
The results we have calculated are presented below, and it is important to note that the totals are cumulative and in billions of U.S. dollars. (The numbers in parentheses indicate amounts still outstanding as of November 10, 2011).
|Facility||Total||Percent of Total|
|Term Auction Facility||$3,818.41||12.89%|
|Central Bank Liquidity Swaps||10,057.4 (1.96)||33.96|
|Single Tranche Open Market Operations||855||2.89|
|Term Securities Lending Facility and Term Options Program||2,005.7||6.77|
|Bear Stearns Bridge Loan||12.9||0.04|
|Maiden Lane I||28.82 (12.98)||0.10|
|Primary Dealer Credit Facility||8,950.99||30.22|
|Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility||217.45||0.73|
|Commercial Paper Funding Facility||737.07||2.49|
|Term Asset-Backed Securities Loan Facility||71.09 (10.57)||0.24|
|Agency Mortgage-Backed Security Purchase Program||1,850.14 (849.26)||6.25|
|AIG Revolving Credit Facility||140.316||0.47|
|AIG Securities Borrowing Facility||802.316||2.71|
|Maiden Lane II||19.5 (9.33)||0.07|
|Maiden Lane III||24.3 (18.15)||0.08|
|AIA/ ALICO (AIG)||25||0.08|
I want to be clear. These are the totals of Fed lending and asset purchases actually undertaken since the bail-out began. There is no double-counting. And we do not include any credit facilities created by the Fed unless they were actually used. These figures accurately reflect the cumulative totals over the approximately three years actually used by the Fed to prop-up domestic and international banks, shadow banks, central banks, and even some non-financial institutions.