Those kinds of deals were the essence of the bailout -- and the vast mountains of near-zero government cash turned companies facing bankruptcy into monstrous profit machines. In 2008 and 2009, Morgan Stanley took possession of $2 trillion in "emergency" Fed loans. During the same period, Goldman borrowed nearly $800 billion. Shortly afterward, Goldman and Morgan Stanley reported a combined annual profit of $14.5 billion. In other words, these two companies alone borrowed nearly $3 trillion from the Fed, gambled much of it in the stocks and derivatives markets, using super-fast high frequency trading programs operating on Cray super-computers, and came out with annual profits totaling $14.5 billion.
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As crazy as it is for the Fed to lend to banks at near zero percent and then borrow the money back from them at 3%, one could at least argue that the policy may have aided American companies by providing banks more cash to lend. But how do you explain the host of other bailout transactions now being examined by Congress? Like the Fed's massive purchases of securities in foreign automakers, including BMW, Volkswagen, Honda, Mitsubishi and Nissan? Or the nearly $5 billion in cheap credit the Fed extended to Toyota and Mitsubishi? Sure, those companies have factories and dealerships in the US -- but does it really make sense to give them free cash at the same time taxpayers were being asked to bail out Chrysler and GM? Isn't it stupid to fund the competition of the very automakers you're trying to rescue? Or is something else going on here? Something nefarious?
And then there are the bailout deals that make no sense at all. Republicans go mad over spending on health care and school for Mexican illegals. So why aren't they flipping out over the $9.6 billion in loans the Fed made to the Central Bank of Mexico?! And how do we explain the $2.2 billion in loans that went to the Korea Development Bank, the biggest state bank of South Korea, whose sole purpose is to promote development in South Korea? And at a time when America is borrowing from the Middle East at interest rates of three percent, why did the Fed extend $35 billion in loans to the Arab Banking Corporation of Bahrain at essentially a zero interest rate?
Even more disturbing, the major stakeholder in the Bahrain bank is none other than the Central Bank of Libya, which owns 59% of the operation. In fact, the Bahrain bank just received a special exemption from the US Treasury to prevent its assets from being frozen in accord with economic sanctions. That's right: Muammar Qaddafi received more than 70 loans from the U.S. Federal Reserve. And in light of this, the video commentary by Max Keiser about 'Financial Terrorism' and Qaddafi's Stolen Billions is of interest. According to Keiser, international banks like Goldman Sachs have been looting Libyan money and were able to siphon billions of dollars from that country. Keiser, who is safely based in Paris, said they did it through monopoly, deceit and lies. Keiser's bottom line message to Americans: Revolt now or be "debt slaves" for life.
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Perhaps the most irritating facet of all of these transactions is the fact that hundreds of millions of Fed dollars were given out to hedge funds and other investors with addresses in the Cayman Islands. Many of those addresses belong to companies with American affiliations -- including prominent Wall Street firms like Pimco and Blackstone. It's one thing for the federal government to look the other way when Wall Street hotshots evade U.S. taxes by registering their investment companies in the Cayman Islands. But subsidizing this tax evasion by giving it a federal bailout? WTF?! This cries out for investigation, but will it ever happen?
As America girds itself for another round of lunatic political infighting over which barely-breathing social program or urgently necessary federal agency must have their budgets put on the chopping block, so as to enable billionaires to keep their third boats and fourth homes in top shape, it's important to point out just how scarce money isn't when it comes to socialism for the rich, i.e. with regard to the money it takes to keep third boats and fourth homes in top shape. There is no belt-tightening on this side of the tracks. Just a free lunch that never ends.
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