90.9 WBUR - Boston's NPR news station
Top Stories:
PLEDGE NOW
Here and Now with Robin Young
Public radio's live
midday news program
With sponsorship from
Mathworks - Accelerating the pace of engineering and science
Accelerating the pace
of engineering and science
Wednesday, November 30, 2011

Fed Secret Loan Program Netted Billions In Profits At Big Banks

The largest government program ever to bail out banks has been a closely guarded secret — until now.

After a three-year fight, Bloomberg News obtained access to thousands of Federal Reserve documents that show which banks got Fed loans, and how much they got, starting back in 2008.

The Fed had been fighting to keep details of those loans secret, including a one-day payout to banks of $1.2 trillion in December, 2008.

Bloomberg calculated that the banks made $13 billion in income off all those loans, which came with very few strings attached.

The Fed says that taxpayers didn’t lose money on the deal, but Bloomberg News reporter Bob Ivry says the secrecy surrounding the loans hid the true financial health of major banks.

“Congress didn’t know about this when it defeated legislation to break up the biggest banks,” Ivry told Here & Now‘s Sacha Pfeiffer.

Ivry said that former Senator Ted Kaufman of Delaware said the atmosphere in Congress would have been different, and there might have been a better chance of passing a bill to break up big banks.

But the legacy of the secret loan program could create what economists call a “moral hazard.”

“Traders for banks who know that their profits are going to be shared only by them, but whose losses will be shared by U.S. taxpayers, might be more willing to take risks,” Ivry said.

Guest:

  • Bob Ivry, Bloomberg News

 


Please follow our community rules when engaging in comment discussion on this site.
Robin and Jeremy

Robin Young and Jeremy Hobson host Here & Now, a live two-hour production of NPR and WBUR Boston.

October 23 Comment

New Documentary Profiles Human Rights Watch Team

An elite group known as the E-Team travels across the globe documenting human rights violations and war crimes.

October 23 Comment

Bottom Of The Sea Is ‘A World Of Surprises’

The world's oceans cover nearly two-thirds of the Earth's surface, yet little is understood about the ocean floor.

October 22 13 Comments

Colorado Backs Away From Pot Edibles Ban

Critics say a ban would violate the state's voter-approved legalization of recreational marijuana, which took effect in January.

October 22 4 Comments

Modest Raise For Social Security Recipients

Economist Diane Swonk says the 1.7 percent cost-of-living increase falls short of the inflation older Americans actually see.