1057 The 2008 Bailout: Fed loaned $16 trillion to banks & businesses. No Recovery for ordinary people

The 2008 Bailout: Fed loaned $16 trillion to banks & businesses. No
Recovery for ordinary people

Newsletter published on September 18, 2019

Michael Hudson argues that the 2008 Bailout was wrong, because it was
based on keeping asset prices at the highs the Bubble had inflated them
to. The benefit was solely to the owners of capital, rather than to
those buying (or renting) a house to live in.

But the Government should not have "done nothing"; that was the policy
of the "Libertarian" Republicans.

Rather, he says, Central Banks should guarantee bank deposits (to
protect the public), but not bailout the owners (shareholders) &
creditors. Let bondholders take the hit, instead of bankrupting the
country as a whole.

I would add: during banking crashes, the banks should be incrementally
nationalised. Public funds injected into a bank should not take the form
of loans, but of shares in the bank. A bank that needs to be bailed out
repeatedly would become more and more publicly-owned - Peter M.

(1) Michael Hudson: There's no Recovery. The future of the United States
is: Greece (2017)
(2) Sanders: Fed loaned $16 trillion to US & foreign banks & businesses
during Fin Crisis
(3) Treasury's Tarp bailout fund was $700bn, but Fed doled out $3,300bn
to stricken banks
(4) European banks took big slice of Fed aid
(5) FED Opens Books Revealing European Megabanks Were Greatest Beneficiaries
(6) Fed reveals it lent billions to hedge funds during crisis

(1) Michael Hudson: There's no Recovery. The future of the United States
is: Greece (2017)

  Michael Hudson: no recovery. The future of the United States is: Greece

https://harpers.org/blog/2017/06/slow-crash/

Conversation — June 5, 2017, 12:01 pm

Slow Crash

Economist Michael Hudson on the future of the stock market

By ANDREW COCKBURN

http://michael-hudson.com/2017/06/harpers-slow-crash/

Michael Hudson

Harper's Slow Crash

By Michael

Monday, June 5, 2017

As published in Harper's Magazine.

ANDREW COCKBURN: Two years before the 2008 Wall Street crash that
toppled the global economy into deep recession, Harper's Magazine
published a dark prophecy of what was to come.

In "The New Road to Serfdom," economist Michael Hudson laid out how
millions of Americans had taken on huge debts to buy houses on the
presumption that they could later sell them at a profit. "Most everyone
involved in the real estate bubble so far has made at least a few
dollars," he wrote. "But that is about to change. The bubble will burst,
and when it does the people who thought they would be living the easy
life of a landlord will soon find out that what they really signed up
for is the hard servitude of debt serfdom." As the twenty million people
who lost their homes discovered, Hudson got it entirely right.

Today, unemployment is at record lows, and the stock market is at record
highs. Allegedly, we have recovered from the disaster. I talked to
Hudson, Distinguished Professor of Economics at the University of
Missouri-Kansas City and the author, most recently, of J is For Junk
Economics, A Guide to Reality in an Age of Deception, about his
pre-crash prediction, and what he now sees in our future.

Let's start with your 2006 Harper's article. What did you see happening
at that point?

MICHAEL HUDSON: It was very clear that more and more of everybody's
income had to go to buying a house. Housing prices were soaring, and the
reason wasn't because of population growth. And it wasn't because people
were getting richer. It's because a house is worth whatever a bank is
going to lend against it, and banks were lending more and more money
against houses and pushing people further and further into debt so that
basically they had to spend almost their entire working life to pay off
the price of getting a home. People thought they were getting richer as
house prices were going up, but while the sellers were getting richer,
the people who had to buy the house had to pay a larger and larger
proportion of their income.

When I first went to work on Wall Street in the 1960s, the rule of thumb
in banks was you'd lend people enough money so that they could afford to
pay the mortgage fully out of only one quarter of their income. In other
words, banks wouldn't lend if the cost of carrying a mortgage was over
25 percent of what they earned. The balance had to be written off in 30
years, so at the end of their working life 30 years later people would
own the home free and clear.

All of that had changed by the mid 2000s. Banks were lending almost 100
percent of the mortgage. You didn't have to put down 20 percent of the
purchase price as you had to in the 1960s. You didn't have to save up
any money to buy a house. Banks would lend you money regardless of
whether you could pay it or not. They would lend money up to 40 percent
of your income or even 50 percent of your income.

You could just see that mortgage debt was going up so much that, instead
of making the economy richer by people living in homes that were
building up their net worth in terms of assets, it was making them more
and more indebted. More and more money was being paid by wage earners
and the middle class to the banks, and the economy was polarizing. You
could see that this was not only going to break, but once there was a
break it was going to leave a whole residue of debt that was going to
shrink the economy. Indeed, that's what I forecast was going to happen
in 2008.

ANDREW COCKBURN: As you predicted and as happened, people just couldn't
pay anymore and the thing collapsed. You could've made a lot of money
out of this. Did you?

MICHAEL HUDSON: No, I couldn't. I could only make money if someone
would've lent me a billion dollars, like they lent to Mr. Paulson [the
Wall Street operator who made billions out of the housing crash] to bet
against it. I'm a professor and a book writer. They'll only lend you
money if they can grab the assets, and I'm somebody that doesn't have
many assets, except a big collection of economics books.

ANDREW COCKBURN: Have you ever heard of someone sitting on Wall Street
who read Harper's in May 2008 and acted appropriately?

MICHAEL HUDSON: I don't think they needed me. If they're on Wall Street,
they didn't need me to tell them that the economy is going to collapse.
They all knew it was going to collapse. That was in the language of
"liar's loans" and "NINJAs." It was pretty obvious what was going on.
It's just the media didn't talk about it because the media was giving
handouts from Alan Greenspan saying that it's not possible for there to
be a real estate collapse, it's only local. The media are cheerleaders
for the stock market. Whenever it goes up they celebrate, even if it
goes up because there's a short squeeze on speculators. The media have
not done a good job in educating the American public.

ANDREW COCKBURN: Has that improved in the time since the crash? Did they
learn anything?

MICHAEL HUDSON: No. If anything, it's gone down, because the media have
all been in a financial squeeze, and they're getting pretty
inexperienced editors, reporters.

ANDREW COCKBURN: At least you have the satisfaction, if that's the word,
of events proving you correct. But we've supposedly now recovered from
that disaster. Have we?

MICHAEL HUDSON: No, we haven't at all recovered. That's why Hillary lost
the election. She said, "Look at how much better you are since 2008.
Obama has saved you." Trump said, "Wait a minute. Look at how bad you
are. You're not saved." Everybody thought, "Who are you going to
believe, your eyes or Hillary?" We haven't recovered at all. Obama saved
the banks and Wall Street, not the economy. From 2008 until today, the
economy has grown by 2 percent, but the top 5 percent of the economy
have got all of that growth. The economy isn't recovering.

That's why when the Department of Labor statistics gave the most recent
employment figures, everybody commented, "It's very interesting.
Employment is up, but wages are continuing to fall." It's all minimum
wage work. The debt ratio for most families is rising, not falling,
especially for student debt, for mortgage debt, for automobile debt. The
default rate is continuing to rise.

Last time around it was housing debt or housing loans that blew
everything up. Have the loans you just mentioned been turned into
speculative packages similar to the infamous collateralized debt
obligations [securities based on housing loans] of yesteryear?

The difference between today's packaged student and auto loans compared
to those toxic junk mortgage loans is that the buyers recognize the
risks involved. No ratings agencies are going to stick AAA labels on
consumer debt where arrears and defaults are soaring. They are unlikely
even to package student debt from for-profit "universities" or technical
schools with bona fide institutions. Every investor knows that students
are NINJAs – No income, No jobs, and no assets.

[But] you could say that the whole stock market is a kind of a ponzi
scheme, because $4.3 trillion has been provided to the banks by the
Federal Reserve in quantitative easing to keep the interest rates down.
So if you're a good bank customer, you can borrow from the bank at 2
percent, you can borrow to take over a company or to buy stocks or to
buy risky bonds that are yielding more, and you can make an arbitrage.
That is, you can make in dividends or interest more than you have to pay.

ANDREW COCKBURN: So are we heading for another explosion comparable to 2008?

MICHAEL HUDSON: I'm not sure it'll be an explosion. It's more like a
slow crash. It's more like people are getting desperate. They're having
to live off their credit cards, not to buy luxuries but just simply to
break even. They're falling further and further behind, and as they fall
behind the interest rate rises, the penalties rise, so people are
getting more and more squeezed.

That's why where I live in New York City, on all the big shopping
streets there are more and more storefronts for rent. The stores are
going out of business, especially the stores that are either mom and
pops, or small well-known stores like art supply stores that have been
there for a generation. Only the big chains are surviving, and even the
chains are closing down, Sears and others. Entire shopping malls are
going into default.

But we keep being told that this is because people are shifting to
online shopping. Is that not the case?

Certainly many people are shopping online, but that's not the real
cause. The real cause is that overall retail sales are going down,
because the average wage earner is only able to spend between a quarter
and a third of their income on goods and services, after what's left
over from housing and taxes. The Federal Housing Authority now
guarantees government mortgages up to 42 percent of your income. In New
York City it's normal to pay 40 percent of your income for rent.

Assume that 40 percent of your income goes for housing. Maybe 15 percent
of your income is taken right off the paycheck by the FICA [Federal
Insurance Contributions Act] for Social Security and essentially
pre-saving for Social Security medical care (which provides the
government with enough money to cut taxes on the higher brackets.)
There's another 10 percent to 15 percent in income taxes, local income
taxes, and sales taxes. In addition to paying the mortgage debt, people
have to pay bank debt, auto debt, and credit card debt. That's about 10
percent. When you add all of these up, there's only about maybe 30
percent of the income that they can spend on goods and services.

Economic textbooks talk about a circular flow, where the workers will
get paid wages and they buy what they produce. That's why Henry Ford
paid his workers $5.00 a day, so that they could afford to buy cars. Now
they only have a little bit to buy what they produce, and the rest of
their money goes to the banks and to the government to give tax cuts for
the top 10 percent. You're having a slow squeeze on the middle class and
the working class in this country, and it's stifling the domestic market.

ANDREW COCKBURN: How do you explain what are billed as record low
unemployment figures?

MICHAEL HUDSON: People are desperate to go to work. But if you look at
where the jobs are, these are minimum wage jobs. Most of the jobs are in
retail, trade, or in other low-paying jobs. Yes, employment is going up,
but at very low wages that don't enable families to save. You can see
this particularly every two years when the Federal Reserve publishes a
survey of consumer finances. You can see for instance that blacks and
Hispanics have almost no savings at all, and 50 percent of the American
population as a whole doesn't have any savings because if you're earning
a low salary, then almost all of what you do earn has to go to pay for
rent and for bank credit and for taxes. ...

(2) Sanders: Fed loaned $16 trillion to US & foreign banks & businesses
during Fin Crisis
https://wallstreetonparade.com/2019/08/bernie-its-time-to-audit-the-new-york-fed/

Bernie, It's Time to Audit the New York Fed

By Pam Martens and Russ Martens

August 1, 2019

On July 21, 2011 the investigative arm of Congress, the Government
Accountability Office (GAO), released the first-ever government audit of
the Federal Reserve in its 98-year history. The audit came about as a
result of the determined efforts of Senator Bernie Sanders to force
transparency on the secretive Wall Street bailout actions of the Federal
Reserve during the 2008 financial crash and the years that followed.
Sanders successfully tacked an amendment on the Dodd-Frank financial
reform legislation of 2010 that mandated a top-to-bottom audit of how
much the Fed had spent on its bailout and the financial institutions to
whom it went.

Sanders issued a statement saying this on the day the findings were
released:

"The first top-to-bottom audit of the Federal Reserve uncovered
eye-popping new details about how the U.S. provided a whopping $16
trillion in secret loans to bail out American and foreign banks and
businesses during the worst economic crisis since the Great
Depression…The Fed outsourced virtually all of the operations of their
emergency lending programs to private contractors like JP Morgan Chase,
Morgan Stanley, and Wells Fargo.  The same firms also received trillions
of dollars in Fed loans at near-zero interest rates. Altogether some
two-thirds of the contracts that the Fed awarded to manage its emergency
lending programs were no-bid contracts. Morgan Stanley was given the
largest no-bid contract worth $108.4 million to help manage the Fed
bailout of AIG."

In effect, the Federal Reserve bailout was conceived by Wall Street and
run by Wall Street for its own benefit and controlled behind a dark
curtain at the Federal Reserve Bank of New York. After Bloomberg News
had won at both the Federal District Court and Appellate Court to have
some of the Fed's lending data released to the public, the very banks
that the Fed was bailing out with trillions of dollars in revolving,
secret loans (Bank of America, JPMorgan Chase, Citigroup and Wells
Fargo) formed a consortium called The Clearinghouse Association LLC, and
filed an appeal with the U.S. Supreme Court to stop the release of the
data. The Supreme Court declined to hear the appeal and the Fed was
forced to release some of the information in 2010.

But even after the GAO released its audit in 2011 showing that the Fed
had sluiced over $16 trillion to a hodgepodge of Wall Street banks,
foreign banks and hedge funds, there was still plenty of secrecy.

The GAO report notes on page two that the audit does not include the
Fed's loans made through its discount window during the financial
crisis. Also, in a tiny footnote on page 2 of the GAO audit, there is
this statement: "…this report does not cover the single-tranche term
repurchase agreements conducted by FRBNY in 2008. FRBNY conducted these
repurchase agreements with primary dealers through an auction process
under its statutory authority for conducting temporary open market
operations." FRBNY stands for the Federal Reserve Bank of New York – the
deeply conflicted and crony regulator of Wall Street whose gross
incompetence had allowed Wall Street banks to become a gambling casino
stuffed to the brim with toxic debt by 2008. (See related articles below.)

The Levy Institute of Economics tried its hand at tallying up all of the
Fed's lending programs, including the single-tranche repurchase
agreements (called ST OMO or single-tranche open market operations on
the Street) and came up with a cumulative tally of $29 trillion.

Equally scandalous, when the Fed released some of its data in 2010 it
showed that $71 billion in loans had been made through one of its
programs called the Term Asset-Backed Securities Loan Facility (TALF).
Billions of dollars from TALF had made its way directly into the pockets
of hedge funds that had played a role in the collapse of the housing
market by shorting subprime debt. (Shorting means to make a wager that
is profitable if the price of the instrument declines in value.) The
Financial Times reported that "FrontPoint-run funds borrowed $4.1bn,
while Magnetar-linked funds borrowed just over $1bn. The two fund
managers were among the most prolific shorters of the US housing market."

Over the past two weeks we have been investigating another bailout
program at the Federal Reserve Bank of New York. It was known as Maiden
Lane LLC (that's the name of one of the streets adjacent to the New York
Fed's headquarters' building in lower Manhattan). When the investment
bank, Bear Stearns, blew itself up with toxic debt in March of 2008,
JPMorgan was willing to take it over but only if the New York Fed took
on the bulk of the risk of Bear's imploding debt pile. Maiden Lane LLC
was a Structured Investment Vehicle (SIV) created to do just that.

According to the deal's term sheet, this is what went down: $30 billion
was going to be purchased from the mortgage desk at Bear Stearns. The
New York Fed put up $28.82 billion in a loan to Maiden Lane LLC to buy
the $30 billion in toxic debt and JPMorgan Chase put up a measly $1.15
billion. According to the New York Fed, Maiden Lane LLC repaid the loan
from the New York Fed with interest on June 14, 2012 and on November 15
of the same year JPMorgan Chase was repaid on its loan to Maiden Lane.

But take a closer look at the deal and there's the same layers of
darkness that the Fed fought a court battle for years to maintain around
its other lending programs.

Bear Stearns assets were acquired and transferred to Maiden Lane LLC on
June 26, 2008 but they were priced as of March 14, 2008 – at a time of
depressed prices on Wall Street.

But instead of providing a 2008 report on what was purchased, the New
York Fed doesn't produce a detailed listing of the asset holdings until
January 2010. Our request to obtain a 2008 asset holdings report went
unanswered.

The January 2010 asset holdings report shows some very strange things to
have been sitting on the mortgage desk at Bear Stearns. It shows a $1.1
billion position in a Morgan Stanley pool called the Morgan Stanley Cap
2008-Top29. It also shows an $849 million position in a Goldman Sachs
deal called GSMS_07-EOP. There's two Thornburg mortgage deals totaling
over $1.8 billion (TMST_05-4 AX and TMST_06-1 AX). Then there's a
staggering $4 billion in debt from the Hilton Hotel chain.

According to a 2008 summary of generic categories of assets, Maiden Lane
LLC did not just buy mortgage backed securities from Bear Stearns, it
also bought $8.2 billion in commercial real estate whole loans; $3.7
billion in derivatives including single name credit default swaps; and
$1.6 billion in residential whole loans.

And while the New York Fed provides regular listings of its asset sales,
it fails to provide the sales price for each asset and to whom it was sold.

When it comes to the sale of its whole loans and physical real estate
that it somehow came to own, it has this to say: "Sales related to whole
loans and real estate owned are excluded from this report due to the
confidentiality provisions that govern these transactions."

Why should anything involving large sums of money that the ultimately
taxpayer-backstopped Federal Reserve or its New York regional bank does
in a financial crisis or its aftermath be entitled to a confidentiality
provision. That issue was already litigated in court for years by the
Fed and Bloomberg News and the Fed lost.

Senator Bernie Sanders needs to call on the Government Accountability
Office to pry loose from the New York Fed all of the missing details of
its crisis era deals and release that as soon as possible to the public.

The American people have been a patsy for Wall Street and its crony
regulator long enough.

(3) Treasury's Tarp bailout fund was $700bn, but Fed doled out $3,300bn
to stricken banks
{that $3,300bn figure was released before the Fed was Audited; the real
value must be adjusted up as per the Audit - Peter M.}

From: ReporterNotebook <RePorterNoteBook@Gmail.com> Date: 03.12.2010
03:46 AM
From: joe webb <webfoote41@yahoo.com>

Wall Street owes its survival to the Fed

By Sebastian Mallaby

December 2, 2010

http://www.ft.com/cms/s/0/9f5584f2-fe1d-11df-853b-00144feab49a.html

For a brief, surreal moment, the prevailing narrative in Washington was
that the 2008-09 bail-outs were not really so bad. In September,
Treasury secretary Tim Geithner called the government's troubled asset
relief programme "one of the most effective emergency programmes in
financial history", claiming that the final cost to taxpayers would be
less than $50bn.

Steven Rattner, the Wall Street banker who oversaw the Obama
administration's rescue of the auto sector, wrote in the Financial Times
in October that "without exaggeration, this legislation [establishing
Tarp] did more to keep America's financial system – and therefore its
economy – functioning than any passed since the 1930s".

But Wednesday's document dump from the Federal Reserve – a
congressionally ordered "WikiLeak moment" – puts this bargain-bail-out
patter in a new perspective. The post-Lehman rescues were far broader
than Tarp, and far riskier for taxpayers, even if the alternative of a
systemic meltdown would have been worse.

The Federal Reserve's revelations underscore the might of unelected
central bankers. The Treasury's Tarp rescue fund, at $700bn, was
considered so audacious that Congress at first refused to authorise it.
But the Fed doled out no less than $3,300bn in loans to banks and
companies without a congressional say-so.

What's more, the Fed frequently ignored Walter Bagehot's dictum that
central banks should provide liquidity freely, but against good
collateral and at high interest rates. The Fed's borrowers included
institutions such as Lehman and Citigroup, which were insolvent rather
than illiquid. It accepted collateral that included toxic asset-backed
securities, and it charged interest rates that were more palliative than
punitive. Moreover, while the Fed took all these risks with US
taxpayers' money, a large chunk of its emergency lending went to foreign
banks.

In its statement accompanying its data dump, the Fed claimed soothingly
to have "followed sound risk-management practices". It is hard to square
that boast with the Fed's Maiden Lane facility, which accepted some of
Bear Stearns' most toxic assets as collateral for a $29bn loan to its
acquirer JPMorgan Chase. The Fed also stated that its "facilities were
open to participants that met clearly outlined eligibility criteria".
But one wonders about criteria that permitted taxpayer-backed loans to
everyone from Verizon Communications and Harley-Davidson to Sumitomo
Corp and the Bank of Nova Scotia.

Richard Fisher, president of the Dallas Fed, manfully concedes that the
central bank took "an enormous amount of risk with the people's money".
But he adds that the risk is now behind us – that the loans have been
paid back and "we didn't lose a dime and in fact we made money". Yet it
is too early to say that. The Fed has yet to recoup the money leant to
JPMorgan in the Bear Stearns rescue; and its later Maiden Lane
programmes, created to help AIG, have not been repaid either. Indeed,
the Fed still has some $29bn of AIG loans on its balance sheet. The
collateral backing this largesse includes $9bn of subprime mortgages and
other smelly assets of dubious value.

The point is not that the Fed was wrong in its determination to stem the
panic following the Lehman bust. Indeed, if the European Central Bank
were similarly audacious, the euro-zone might be better off today. The
most recent leg of Europe's crisis began when the ECB ran out of good
collateral to lend against, and demanded that politicians assume the
burden of the bail-out – a role that the politicians predictably
bungled. Far better to have an activist central bank that takes ugly
risks with its own balance sheet than a fastidious puritan that throws
the economy to the elected dogs.

Rather, the point is that the Fed bail-outs were hair-raisingly
enormous, and that neither the regulators nor the regulated should be
allowed to forget that. Wall Street institutions that now walk tall
again survived only because the taxpayers saved them. Goldman Sachs
turned to the Fed for funding on 84 occasions, and Morgan Stanley did so
212 times; Blackrock, Fidelity, Dreyfus, GE Capital – all of these
depended on taxpayer backstops. The message from this data dump is that,
two years ago, these too-big-to-fail behemoths drove the world to the
brink of a 1930s-style disaster – and that, if regulators don't break
them up or otherwise restrain them, they may do worse next time.

(4) European banks took big slice of Fed aid

http://www.ft.com/cms/s/0/4dd95e42-fd6d-11df-a049-00144feab49a.html

By Robin Harding and Tom Braithwaite in Washington and Francesco
Guerrera in New York

Published: December 1 2010 17:30 | Last updated: December 2 2010 00:12

Foreign banks were among the biggest beneficiaries of the $3,300bn in
emergency credit provided by the Federal Reserve during the crisis,
according to new data on the extraordinary efforts of the US authorities
to save the global financial system.

The revelation of the scale of overseas lenders' borrowing underlines
the global nature of the turmoil and the crucial role of the Fed as the
lender of last resort for the world's banking sector.

However, news that banks such as Barclays of the UK, Switzerland's UBS
and Dexia of Belgium borrowed billions of dollars at favourable terms
from US authorities may further anger critics already enraged about the
Fed's rescue of Wall Street.

(5) FED Opens Books Revealing European Megabanks Were Greatest Beneficiaries

http://futurefastforward.com/feature-articles/4606

Shahien Nasiripour

Friday, 03 December 2010
Huffington Post

NEW YORK -- The Federal Reserve on Wednesday reluctantly opened the
books on its monumental campaign to save the financial system in the
midst of the recent crisis, revealing how it distributed some $3.3
trillion in relief.

The data revealed that the Fed's aid was scattered much more widely than
previously understood. Two European megabanks -- Deutsche Bank and
Credit Suisse -- were the largest beneficiaries of the Fed's purchase of
mortgage-backed securities. The Fed's dollars also flowed to major
American companies that are not financial players, including McDonald's
and Harley-Davidson, through unsecured short-term loans.

The measure, initiated in Jan. 2009 to stimulate the flow of credit and
keep household borrowing costs low, led the nation's central bank to
purchase more than $1.1 trillion in mortgages packaged into the form of
securities. The mortgage bonds are backed by Fannie Mae and Freddie Mac,
the twin mortgage giants now owned by taxpayers.

Deutsche Bank, a German lender, has sold the Fed more than $290 billion
worth of mortgage securities, Fed data through July shows. Credit
Suisse, a Swiss bank, sold the Fed more than $287 billion in mortgage
bonds.

The data had previously been secret. It was released Wednesday per the
recently-enacted law overhauling the federal financial regulation. The
Fed, ferociously backed by the Obama administration, fought lawmakers'
desire for full disclosure throughout the financial reform debate.

The mortgage purchase program has come under withering criticism by
economists and financial experts who believe the Fed's initiative has
unnecessarily inflated the housing market, and prevented the cleansing
that pretty much all experts believe is necessary for a full economic
rebound. However, the program has also been heavily praised for
preventing an Armegedon-type situation in which mortgage costs could
have skyrocketed, collapsing the housing market and leading to even more
foreclosures.

Data released Wednesday shows which Wall Street firms have been the
biggest beneficiaries of the Fed's bond buying program. The fact that
foreign lenders benefited the most is sure to irk lawmakers.

(6) Fed reveals it lent billions to hedge funds during crisis
http://www.ft.com/cms/s/0/62a1ffd2-fe49-11df-abac-00144feab49a.html

By Sam Jones, Hedge Fund Correspondent

Published: December 2 2010 20:14 | Last updated: December 2 2010 20:14

The US Federal Reserve lent billions of dollars to hedge funds as part
of its emergency liquidity programme during the financial crisis, data
released by the central bank show.

According to Fed data, $71bn of loans were made through its term
asset-backed securities loan facility (Talf) mostly to non-bank
institutions. They included hedge funds run by managers including
FrontPoint, Magnetar, and Tricadia, many of which reaped handsome
rewards from the collapse of the housing market.