The meat of Eric Fry's "secrets bailouts" was in yesterday's post. Today we have the second part, which can be read in its entirety here:
http://dailyreckoning.com/tolerating-deception-for-the-sake-of-economic-growth/
During the height of the credit crisis of 2008-9, the Federal Reserve and Treasury launched so many different lending programs and bailout facilities that it was hard to keep track of them all.
Each program or facility used a distinct acronym to represent its particular portion of Bernanke’s Bailout Buffet. Thus, for example, the Commercial Paper Funding Facility became simply the “CPFF.” But the Fed also served up bailout facilities known as the TARP, TOP, TAF, TSLF, TALF, PDCF, AMBSPP, etc.
At the end of the day, this “alphabet soup” of lending programs contained distinctions without a difference. On the receiving side of every acronym you would find a Wall Street banker with a hat in his hand. For ease of accounting, the Fed could have simply merged all the programs together into one giant WSBBF (Wall Street Banker Bailout Facility). But politics prevented that option.
So instead, the Fed created lots of different programs and facilities with essentially identical mandates. And if you’re curious about the volume of lending they conducted, or about any other component of the Fed’s balance sheet, you can find the information right here…or at least most of the information.
...(If you click the link you can also read how the FED deliberately lies about its balance sheet by refusing to add its long term Treasury purchases to its published graphs.)...
Under the 18th and 19th century versions of privateering, governments would license private firms to plunder enemy ships for profit – profits that the privateers and the governments would share.
Today, the privateering continues. But the process has been turned on its ear. Now it is we, the taxpayers, who are plundered by the government – the spoils of which it lavishes upon a select group of privileged corporations. If the “new privateers” fail, the government (i.e. taxpayers) absorbs the loss. But if the privateers succeed, they split the booty with no one but themselves.
“This is called private profits and socialized risk,” observed hedge fund manager, David Einhorn, during a presentation to the Grant’s Investment Conference in April, 2008. “Heads, I win. Tails, you lose. It is a reverse-Robin Hood system.”
But the new privateering does not only rely on socialized risks, it also relies on socialized ignorance.
Two weeks ago, a provision in the new Dodd-Frank financial reform law dragged some of the Fed’s dirty little secrets out into the light of full public disclosure. Thanks to these new revelations, the Fed finally disclosed what many of us had already suspected - that a lot of America’s biggest financial firms repaid small sums of fully disclosed federal assistance during 2009, while simultaneously accessing very large sums of undisclosed federal assistance.
These “secret bailouts” did not merely socialize risks in order to confer rewards to a few; they also socialized ignorance in order to confer valuable inside information to a few. These two processes operated hand-in-hand throughout the crisis. The insider-cognoscenti made billions while the rest of us patsies wrote the checks.
Without mass ignorance, government agencies have a tough time doing “what’s best for us.” In other words, plundering an informed populace is much more difficult than plundering an uninformed one.
http://dailyreckoning.com/tolerating-deception-for-the-sake-of-economic-growth/
During the height of the credit crisis of 2008-9, the Federal Reserve and Treasury launched so many different lending programs and bailout facilities that it was hard to keep track of them all.
Each program or facility used a distinct acronym to represent its particular portion of Bernanke’s Bailout Buffet. Thus, for example, the Commercial Paper Funding Facility became simply the “CPFF.” But the Fed also served up bailout facilities known as the TARP, TOP, TAF, TSLF, TALF, PDCF, AMBSPP, etc.
At the end of the day, this “alphabet soup” of lending programs contained distinctions without a difference. On the receiving side of every acronym you would find a Wall Street banker with a hat in his hand. For ease of accounting, the Fed could have simply merged all the programs together into one giant WSBBF (Wall Street Banker Bailout Facility). But politics prevented that option.
So instead, the Fed created lots of different programs and facilities with essentially identical mandates. And if you’re curious about the volume of lending they conducted, or about any other component of the Fed’s balance sheet, you can find the information right here…or at least most of the information.
...(If you click the link you can also read how the FED deliberately lies about its balance sheet by refusing to add its long term Treasury purchases to its published graphs.)...
Under the 18th and 19th century versions of privateering, governments would license private firms to plunder enemy ships for profit – profits that the privateers and the governments would share.
Today, the privateering continues. But the process has been turned on its ear. Now it is we, the taxpayers, who are plundered by the government – the spoils of which it lavishes upon a select group of privileged corporations. If the “new privateers” fail, the government (i.e. taxpayers) absorbs the loss. But if the privateers succeed, they split the booty with no one but themselves.
“This is called private profits and socialized risk,” observed hedge fund manager, David Einhorn, during a presentation to the Grant’s Investment Conference in April, 2008. “Heads, I win. Tails, you lose. It is a reverse-Robin Hood system.”
But the new privateering does not only rely on socialized risks, it also relies on socialized ignorance.
Two weeks ago, a provision in the new Dodd-Frank financial reform law dragged some of the Fed’s dirty little secrets out into the light of full public disclosure. Thanks to these new revelations, the Fed finally disclosed what many of us had already suspected - that a lot of America’s biggest financial firms repaid small sums of fully disclosed federal assistance during 2009, while simultaneously accessing very large sums of undisclosed federal assistance.
These “secret bailouts” did not merely socialize risks in order to confer rewards to a few; they also socialized ignorance in order to confer valuable inside information to a few. These two processes operated hand-in-hand throughout the crisis. The insider-cognoscenti made billions while the rest of us patsies wrote the checks.
Without mass ignorance, government agencies have a tough time doing “what’s best for us.” In other words, plundering an informed populace is much more difficult than plundering an uninformed one.
Trade Date: 12/16/10
E-Mini S&P Trades*
(before fees and commissions):
E-Mini S&P Trades*
(before fees and commissions):
- No “Secrets” trades filled today.
- Algorithm positions (4)
- “Reading the Tape” positions (2) …combined Secret’s, Algo, & “Reading the Tape” total… +1.50
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