Royal Bank of Scotland (RBS) – #4 recipient of the Fed’s “secret liquidity lifelines”

Bloomberg Nov 28, 2011:                                                                                                       “Royal Bank of Scotland Group Plc, whose 45.5 billion-pound ($74 billion) emergency capital injection from U.K. taxpayers was the world’s biggest announced bank bailout, also got more secret loans from the U.S. Federal Reserve than any other foreign bank. On Oct. 10, 2008, as the bank’s stock price plunged 21 percent in a single day, the Edinburgh-based RBS was borrowing $62.5 billion from the Fed through its U.S. broker-dealer, $11.5 billion through its New York branch, $10 billion through its RBS Citizens NA bank and $500 million through Citizens Bank of Pennsylvania. The Fed aid exceeded even the 36.6 billion pounds of emergency liquidity the Bank of England supplied in secret to RBS in October 2008. The BOE disclosed the aid package in November 2009, more than a year before the Fed aid was revealed.”

RBS’ secret liquidity line from the Fed served up a “peak amount of debt” totaling $84.5 billion on 10/10/2008.

RBS also happened to be one of a suspected dozen or so major banking interests involved in the big Libor ‘interest rate fixing” scandal – which bilked “U.S. states, counties, and local governments” to the tune of “at least $6 billion in fraudulent interest payments, above [and beyond the] $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation,” according to Bloomberg (10 Oct 2012).

ZeroHedge 02/06/2013:  RBS Busted On Libor Manipulation: “its just amazing how libor fixing can make you that much money”


All of this leads naturally to the question:  How can the Federal Reserve and the U.S. Treasury justify the transfusion of massive liquidity streams into the veins of major banks like Morgan Stanley, Citigroup, Bank of America, and subsidiaries of major foreign banks like RBS….and at the same time deny equal access to credit by American families?

How can the Federal Reserve deny access to liquidity by American families who have not broken any laws, while continuing to support the likes of RBS – who blatantly manipulated Libor rates, to the detriment of states, counties, and local governments…?

It’s time to level the playing field.                                                                                                   The Leviticus 25 Plan.

QE – “the greatest backdoor Wall Street bailout of all time.”

Andrew Huszar directed the Federal Reserve’s [QE1] $1.25 trillion agency mortgage-backed security purchase program which kicked off during March 2009.

Here are his after-thoughts…or “confessions”  (Andrew Huszar: Confessions of a Quantitative Easer – excerpts):

“We went on a bond-buying spree that was supposed to help Main   Street. Instead, it was a feast for Wall Street.

I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

Five years ago this month, on Black Friday, the Fed launched an unprecedented shopping spree. By that point in the financial crisis, Congress had already passed legislation, the Troubled Asset Relief Program, to halt the U.S. banking system’s free fall. Beyond Wall Street, though, the economic pain was still soaring. In the last three months of 2008 alone, almost two million Americans would lose their jobs.

The Fed said it wanted to help—through a new program of massive bond purchases. There were secondary goals, but Chairman Ben Bernanke made clear that the Fed’s central motivation was to “affect credit conditions for households and businesses”: to drive down the cost of credit so that more Americans hurting from the tanking economy could use it to weather the downturn. For this reason, he originally called the initiative “credit easing.”

In its almost 100-year history, the Fed had never bought one mortgage bond. Now my program was buying so many each day through active, unscripted trading that we constantly risked driving bond prices too high and crashing global confidence in key financial markets. We were working feverishly to preserve the impression that the Fed knew what it was doing.

It wasn’t long before my old doubts resurfaced. Despite the Fed’s rhetoric, my program wasn’t helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn’t getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash.

Trading for the first round of QE ended on March 31, 2010. The final results confirmed that, while there had been only trivial relief for Main Street, the U.S. central bank’s bond purchases had been an absolute coup for Wall Street. The banks hadn’t just benefited from the lower cost of making loans. They’d also enjoyed huge capital gains on the rising values of their securities holdings and fat commissions from brokering most of the Fed’s QE transactions. Wall Street had experienced its most profitable year ever in 2009, and 2010 was starting off in much the same way.

That was when I realized the Fed had lost any remaining ability to think independently from Wall Street. Demoralized, I returned to the private sector.

Where are we today? The Fed keeps buying roughly $85 billion in bonds a month, chronically delaying so much as a minor QE taper. Over five years, its bond purchases have come to more than $4 trillion. Amazingly, in a supposedly free-market nation, QE has become the largest financial-markets intervention by any government in world history.

And the impact? Even by the Fed’s sunniest calculations, aggressive QE over five years has generated only a few percentage points of U.S. growth. By contrast, experts outside the Fed, such as Mohammed El Erian at the Pimco investment firm, suggest that the Fed may have created and spent over $4 trillion for a total return of as little as 0.25% of GDP (i.e., a mere $40 billion bump in U.S. economic output). Both of those estimates indicate that QE isn’t really working.

Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets.”                                                                               _____________________________

The Leviticus 25 Plan levels the playing field by providing direct credit extensions to U.S. citizens.  This would provide real economic stimulus for Main Street America.  And it would restore economic liberty across the land.

America, it is time for a change.  It is time for a bold, new economic plan.

Bank of America – #3 recipient of Fed’s “secret liquidity lifelines”

Bank of America – the story behind the story                                                       (Source:  Bailout Nation)

June 2005:  Bank of America takes a 9 percent stake in China Construction Bank for #3 billion; China’s market tops out in 2007 and then plummets 72 percent.

January 2006:  Bank of America acquires MBNA for $35 billion.  The world’s largest issuer of credit cards [MBNA] is taken over right before the world’s largest credit crunch occurs and (whoops) just before the worst postwar recession begins.

August 2007:  Bank of America invests $2 billion in Countrywide Financial, the nation’s biggest mortgage lender and loan servicer.  It is a jumbo loser, dropping 57 percent in a few month’s time

January 2008:  Bank of America doubles down and announces a $4.1 billion acquisition of Countrywide.  The timing is flawless, and the purchase is announced as the worst housing collapse in modern history is accelerating.

September 2008:  Bank of America pays $50 billion for Merrill Lynch, including Merrill’s portfolio of toxic assets (along with some previously unannounced trading desk errors).


And… following the above cited BofA follies, the Treasury Department and the Federal Reserve stepped up to the plate and kindly dished out billions of dollars (at U.S. citizen taxpayer expense) to Bank of America to keep the big dog afloat.

To recap (Source: Bloomberg Nov 28, 2011 ):                                                                Morgan Stanley was the #1 recipient of Fed secret loans at $107 billion (peak loan amount – 9/29/2008).                                                                                                 Citigroup was the #2 recipient of the Fed’s secret lifelines $99.5 billion (peak loan amount – 1/20/2009).                                                                                                   Bank of America was the #3 recipient with $91.4 billion (peak loan amount –  2/26/2009).

Bloomberg Nov 28, 2011:  “Bank of America Corp., which got two rounds of U.S. Treasury Department capital injections totaling $45 billion to stay afloat during the credit crisis, borrowed twice that amount in secret from the Federal Reserve. On Feb. 26, 2009, the Charlotte, North Carolina-based bank held $78 billion of loans from the Fed’s Term Auction Facility, $8.65 billion from the Primary Dealer Credit Facility, $4.75 billion from the Term Securities Lending Facility. The financing helped bolster the largest U.S. bank by assets as investors worried its 2008 acquisitions of Merrill Lynch & Co. and Countrywide Financial Corp. might lead to nationalization.”


And … one final question:

Is there anyone who still believes that it is OK for major players in banking and financial services to receive massive liquidity injections (at taxpayer expense) when their financial viability goes ‘toes up’ … due to their own insane investment decision-making.

But it is not OK for U.S. citizens to be accorded the same access to credit extensions?The Leviticus 25 Plan.

Big government – $4.4 billion in administrative costs just to “operationalize” state healthcare websites…

The U.S. healthcare system needs one simple fix – a citizen-based allocation of resources, rather than big-government central planning.

Our politicians have created a lumbering, red-tape laden healthcare monstrosity with bureaucrats, analysts, programmers, regulators, monitors, enforcers, healthcare coaches, and NFL advertisers all involved in the chain of players.

Website work alone reached an eye-popping $4 billion. It was recently announced that the government has spent $4.4 billion on ramping up state healthcare websites in “several waves of grants.”  In addition, last month Kathleen Sebelius testified on Capitol Hill that “the federal website has so far cost $174 million, including $56 million in technological support with more still owed to contractors.”

We need to refocus on the patient and the providers.  We need to decentralize.    We need to return to a cash basis.

Direct the Federal Reserve to electronically deposit $16,000 in to the Medical Savings Account (MSA) of every participating U.S. citizen.  Reverse the individual mandate to bring the private insurers back onto the playing field, and let families purchase high-deductible major medical policies with precisely the types of coverage they desire.

This would allow Americans to keep their major medical plans, keep their doctors and keep their pharmacists.

For a period of 5 years. participating U.S. citizens concurrently enrolled in Medicare, Medicaid, VA, TriCare, and FEHB (approximately 121 million people) would not lose coverage in these programs, but would be responsible for covering a $3,000 annual deductible (all covered by the newly-available MSA funds).

This would allow for American families themselves to allocate $363 billion of their healthcare expenditures each year during the 5 year period – instead of running it through big government programs.

This “Citizens Plan” would have a wonderful, cleansing effect.  It would cut out the dead wood (millions of middlemen) and restore individual freedom of choice for choosing one’s own providers and services.  And all citizens would have resources for their basic day-to-day healthcare needs.

Doors are closing fast in the healthcare field.  We need a rescue plan. Cash paying customers would reopen a lot of doors.  America needs that.

America needs The Leviticus 25 Plan.


Citigroup – #2 recipient of Fed Secret Loans (2008-10)

Following the repeal of the Glass-Steagall Act in 1998, Citigroup dove headlong into the derivatives market.  “By 2007 Citi was the largest issuer of CDOs [Credit Default Obligations] … $49 billion worth when the world’s total production was $442 billion.” (Source: Bailout Nation)

Citi later took advantage Structured Investment Vehicles (SIVs) to move high-risk investments off their balance sheets – into “Enron-like side pockets.”

When the housing market began staggering badly in 2007 under the weight of increasing loan delinquencies and foreclosures, “Citigroup’s SIVs were festooned with $87 billion of toxic assets, mortgage-related CDOs, and other long-term paper…. ”

Short-term financing dried up, and the SIVs worked their way back “in-house.”  And “by December 2007, Citi assumed $58 billion of debt to ‘rescue’ $49 billion in Assets.”  (Bailout Nation)

The Federal Reserve then cranked open the “Secret Loan” fire hose to flood Citi (and scores of others) with massive liquidity injections (or, in the common parlance, ‘free money’).

Citigroup – #2 recipient of Fed Secret Loans (2008-10)                                                 Bloomberg – Nov 28, 2011

“Citigroup Inc., the third-largest U.S. bank by assets, received a $45 billion capital injection in 2008 from the U.S. Treasury. The New York-based lender got a bigger bailout from the Federal Reserve: $99.5 billion of emergency loans, about the cost of paying, clothing, housing, arming and transporting the U.S. Army for fiscal 2011. On Jan. 20, 2009, as the bank’s shares fell to $2.80, down almost 90 percent in a year, its Fed loans included $34.1 billion from the Term Securities Lending Facility, $25.1 billion from the Commercial Paper Funding Facility, $25 billion from the Term Auction Facility, $14 billion from the Primary Dealer Credit Facility and $1 billion from single-tranche open market operations.”


And the point of this little historical ‘look back’ is to simply restate the case that U.S. citizens deserve nothing less than equal access to credit extensions that was provided to Morgan Stanley, Citi, and the scores of other financial enterprises whose high risk investment profiles led to financial calamity and rescue action by the Federal Reserve.

It is time now for the Fed to extend credit to American families via a “U.S. Citizens Credit Facility.”                                                                                                              The Leviticus 25 Plan

The Fed’s perfect (and perhaps ‘only’) interest rate normalizing strategy – The Leviticus 25 Plan

It is common knowledge that if the Fed were to ‘withdraw’ its back-door POMO support from the Treasury market and let rates ‘normalize’ – some strong, and perhaps unrelenting, deflationary winds would quickly roar in across America.

Higher across-the-board rates would rattle the housing market along with most other parts of the U.S. economy.

The interest expense on government ‘new issuance debt’ and ‘maturing debt’ each month would quickly snowball into a full-blown crisis.

Under the current approach, there is no possible way for the Fed to begin ‘tapering’ or allowing the normalization of interest rates.

The Fed needs an outside-the-box solution. The Leviticus 25 Plan is that solution.

Assuming an 80% participation rate by U.S. citizens, the Fed would extend, direct to American families, $15.4 trillion.  Those funds would go into the Family Accounts (FA) and Medical Savings Accounts (MSA) of U.S. citizens.

This liquidity flow would allow for massive debt reduction for American families, providing them with financial stability and insulating them from the otherwise grinding-down effects of higher rates, as rates began to normalize.

The recapture provision would (very conservatively) generate government budget savings of $8.1 trillion during the first 5 years of the plan.  That would amount to $1.6 trillion per year.

Assuming annual deficits of $700 – $800 billion during that time, the Department of the Treasury would not only NOT be faced with monthly deficits (and new issuance debt), they would end up with a significant fiscal surplus.  And the majority of that surplus each year would be dedicated as ‘flow-back’ to the Federal Reserve for balance sheet reduction.

Higher rates would then NOT lead to snowballing government interest rate expenses and the devastating after-effects.

The Leviticus 25 Plan would substantially neutralize the potentially constricting effects of rate-normalization.  It would re-incentivize work in America, improve productivity, and it would re-ignite economic growth in the U.S..

There is no other plan anywhere in the world that would provide the dynamic benefits of this plan.  Outside-the-box considerations are right now critical to the economic future of America and economic liberty for all Americans.                                                           The Leviticus 25 Plan.