Putting aside the larger argument for the moment about whether we–the taxpayers–should have stepped into to save failing institutions, it is pretty clear now that what we also did was just give a nice new revenue stream for banks that did not need the money but figured, heck, why not get our taste from the trough.
This becomes clear today via The Financial Times in two stories. You could read that:
Some of the world’s strongest banks have profited from an emergency credit facility set up by the US Federal Reserve to shore up confidence in the global financial system, according to a Financial Times analysis of data released by the Fed.
More than half of lending under the Fed’s term auction facility – the largest of its crisis programmes – went to foreign banks. Details of the varied uses to which they put it may add to political criticism of the Fed…
…Rabobank of the Netherlands and Toronto-Dominion of Canada, two of the only banks in the world with triple A credit ratings, used more than $20bn in cumulative Taf loans.
Ed Clark, TD chief executive, said that using Taf was logical even though his bank never had a liquidity problem. "That wasn’t how we made a lot of money. But you make a dollar here, you make a dollar there. What’s the spread you make on a billion dollars?" he said.
Clark’s comment reminds me of the famous quote quote from Sen. Everett Dirksen: "A billion here, a billion there, and pretty soon you’re talking about real money." I guess Clark is pretty happy, as he should be, to pocket some unforeseen profits courtesy of the Fed.
And, then, the companion story from the FT:
There were three broad groups of foreign TAF users. The first included some of the world’s strongest banks such as Rabobank of the Netherlands and several large Canadian banks. They did not much need the liquidity. But TAF interest rates were low and the authorities were encouraging them to borrow, so they did.
To which Bernie Sanders says:
"We’re talking about huge sums of money going to bail out large foreign banks. Has the Federal Reserve of the United States become the central bank of the world?"
I guess we know the answer.
But, while we were lending to the world at incredibly great rates, it was fine to be chintzy on the stimulus plan for the workers, putting together a tax-break laden wimpy $787 billion in 2009 when we needed at least double the stimulus plan focused on jobs and stripped of tax breaks.
