“Banks got bailed out, we got sold out.”
That’s the chant at many Occupy rallies around the country. And, until today, we simply didn’t know how right they are. That’s because the extent of the bailout was kept secret, not only from us but from the legislators who were in the position to decide on appropriate regulations for the major banks in the United States and around the world.
But now we know the extent to which the banks got bailed out, thanks to Bloomberg.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates.
The bankers’ argument all along, against the possibility of more stringent regulations and perhaps even the threat of breaking up those “too big to fail,” was they shouldn’t be penalized for their success. What they didn’t reveal, nor did the Federal Reserve itself, was that the largest banks were receiving an enormous sum of guarantees and subsidized loans and using them to bring in additional earnings. The total of $7.77 trillion dwarfs the one program we did know something about, the Troubled Asset Relief Program, which itself amounted to $700 billion. And in neither case were any limits placed on how the banks used the money.
There’s no doubt the Fed’s emergency response prevented a financial collapse. There’s also no doubt that it continues to be business as usual for the country’s largest banks—and dire economic conditions for the country’s workers, who continue to suffer from long-term unemployment, stagnant incomes, and home foreclosures.
We can therefore expect to continue to hear from protests in the streets, “Banks got bailed out, we got sold out.”