Société Générale S.A. – #25 recipient of Fed’s “secret liquidity lifelines”

Société Générale S.A. (SocGen), the 3rd largest bank in France and 8th largest in Europe, hit some ‘speed bumps’ in 2008. They announced to the world on the 28th of January 2008 that one of their junior future traders had racked up a series of regrettable trading losses. And the company was ‘out’ a cool $7.2 billion.

At about this same time, wiser minds at SocGen were ‘chasing yield’ and loading the company up with Mortgage Backed Securities, including certain ‘cesspool grade’ MBS’s, packaged and pedaled by Goldman Sachs. They insured their mortgage-backed asset portfolio with billions of dollars worth of hedging in AIG ‘sewer-quality’ credit default swaps (CDS’s).

AIG, with no meaningful reserves, bled out quickly when the mortgage default wave ripped across America in 2007-08, and SocGen was staring up at an $11 billion loss.

The U.S. Federal Reserve stepped in to ‘cover’ AIG’s counterparties (at 100 cents on the dollar), and SocGen promptly received (courtesy of U.S. taxpayers) $6.9B in CDS payments and $4.1B in collateral postings from AIG in March 2009.

On top of all that, the Fed aimed the “secret liquidity lifeline” water canon SocGen’s way and soaked them with an additional $17.4B.

And SocGen regained its ‘financial health’ by the end of 2010. Thanks to U.S. taxpayers.

Bloomberg  Nov 28, 2011  Excerpts:

Societe Generale SA, which in January 2008 spooked investors by announcing a record 4.9 billion-euro ($7.2 billion) trading loss from unauthorized bets by a former trader, was one of the earliest borrowers from the U.S. Federal Reserve’s discount window during the crisis. On May 22, 2008, the Paris-based bank got $3.5 billion of loans from the window — 23 percent of the total outstanding for all banks on that date — in addition to $13.9 billion from the Term Auction Facility.

After Lehman Brothers Holdings Inc.’s collapse in September 2008, Societe Generale received 1.7 billion euros of preferred shares and 1.7 billion euros of subordinated debt from the French government to bolster its capital and lending. The bank repaid the state funds in November 2009 after a rights offering.

Peak amount of [Fed-based] debt on 08/22/2008: $17.4B

……………………………………………………

It would certainly be reasonable for U.S. citizens to be granted access to the same direct liquidity flows that major U.S. and foreign banks received during the financial crisis of 2007-2010.

This access to liquidity would relieve debt burdens at ‘ground level’ in America, and help restore ‘financial health’ to U.S. taxpayers.

The Leviticus 25 Plan.

 

Fed forking over millions to foreign banks through IOER scheme

With millions of American families financially distressed and living paycheck-to-paycheck, the Federal Reserve is handing out ‘free money’ to foreign banks through an Interest On Excess Reserves (IOER) arbitrage play.

David Stockman explains the process:
In recent years foreign banks have been tapping U.S. money market funds for very cheap short-term loans. Unlike domestic banks, foreign banks don’t have domestic depositors to tap for funds, so they turn elsewhere for dollars. Money market funds make the funds available for a few hundredths of a percentage point. The foreign banks in turn park those loans at the Fed for 0.25% interest. They earn profits on the spread between the cheap cost of funds available from money market funds and the higher rate they get at the Fed.
It’s a trade that domestic U.S. banks have been unwilling to make because they have to pay additional fees to the Federal Deposit Insurance Corp. on their borrowings, fees the foreign banks don’t have to pay.

Source:  “Why The Fed’s Outrageous Gift To Foreign Banks— Risk Free Aribitrage On IOER–Is Just The Tip Of The Iceberg”  –  by David Stockman

This is a risk-free arbitrage play, with the Fed forking over millions of dollars of U.S. taxpayer funds to ……. foreign banks.
____________________________

Meanwhile, in America today there are 47 million Americans on food stamps – and on top of that, millions of Americans are lining up at food pantries and ‘soup lines’ each week.

According to RealtyTrac (August 2014), “There are currently 1,089,253 properties in U.S. that are in some stage of foreclosure (default, auction or bank owned)…”

Real Median Household Income has been in a steady downtrend for a decade.

Big government social welfare programs dribble out benefits each week and disincentivize work in a way that perpetuates the underclass.

Central-planning and ‘government allocation of resources” dispense political favors and generate gross price distortions.

And our U.S. Federal Reserve is subsidizing foreign banks…

It is time for American families to be granted the same access to their own money that that foreign banks are have access to through the Fed’s IOER scheme.

It is time to get America moving again with a plan that restores economic freedom, reduces the scope and control of big government over citizens, and restores economic health in America – and pays for itself over a 10-15 year period.

The Leviticus 25 Plan.

HBOS Plc – #24 recipient of Fed’s “secret liquidity lifelines”

Bloomberg  Nov 28, 2011 –  Excerpts:

As the U.K.’s biggest mortgage lender, Edinburgh-based HBOS Plc faced mounting losses in September 2008 on subprime home loans to people with poor credit histories, as well as on so-called Alt-A loans, which didn’t require borrowers to provide proof of income.

On Sept. 18, London-based Lloyds TSB Group Plc agreed to buy HBOS, and the U.K. government later injected 17 billion pounds ($27 billion) of capital into Lloyds to assure the deal closed.

The Federal Reserve helped too. HBOS borrowed as much as $18 billion from the U.S. central bank in November 2008. Lloyds completed the takeover in January 2009 and kept using HBOS as a conduit to borrow from the Fed through February 2010.

Peak amount of debt on 11/20/2008: $18B

……………………………….

Note: Lloyds Banking Group, Plc was recently named as one of the banks involved in defrauding U.S. citizens and municipalities via LIBOR rate manipulation.

LIBOR rate-rigging defrauded U.S. mortgage holders via ARMs resets. It also burned municipalities across the U.S. billions out of dollars in municipal bond costs by artificially ‘tilting’ rates against the interest rate swaps that had been purchased by municipalities, such as Baltimore, to hedge the bonds. And it adversely affected the value of ‘swap lines’ that were held by several dozen U.S. banks.

Reuters reported on March 14, 2014 that the FDIC was suing 16 banks that it believed were involved in LIBOR rate-rigging: “The banks named as defendants include Bank of America Corp, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings PLC, JPMorgan Chase & Co, and Royal Bank of Scotland Group PLC.”

“Other defendants in the lawsuit are Rabobank, Lloyds Banking Group plc, Societe Generale, Norinchukin Bank, Royal Bank of Canada, Bank of Tokyo-Mitsubishi UFJ and WestLB AG.” Barclays and UBS had already settled.
……………………………………………..
Note: all of the named banks had received billions of dollars, during the height of the financial crisis, from the Fed’s “secret liquidity lifelines.”
Citigroup, peak amount received from Fed: $99.5B
Bank of America: $91.4B
RBS: $84.5B
Barclays $64.9B
The most recent bank to be implicated, and fined: Lloyd’s Banking Group, Plc, peak amount received from Fed during the financial crisis: $505M
___________________________________
The very banks that received billions of dollars in bailout funds from the U.S. Federal Reserve were defrauding American families, state municipalities, and other U.S. financial institutions.
American families deserve nothing less than the same access to liquidity that these banks received, from U.S. taxpayers, during the financial crisis.

The Leviticus 25 Plan

Fed Vice Chair: “global growth … slowing … broad-based”

NY Times, Aug 11, 2014: Stanly Fischer, Vice Chairman of the Federal Reserve
Excerpts:

“Year after year, we have had to explain from midyear on why the global growth rate has been lower than predicted as little as two quarters back,” he said. “This slowing is broad-based, with performance in emerging Asia, importantly China, stepping down sharply from the post-crisis surge, to rates significantly below the average pace in the decade before the crisis.”

Mr. Fischer said it was difficult to determine how much of the slackness was because of cyclical factors and how much represented a more fundamental, structural change in advanced economies.

But he warned of three pronounced headwinds that have held back growth in the United States: a still anemic housing market, cuts in federal government spending and weaker global growth that reduced demand for American exports.
__________________________________________

Note – the Federal Reserve and the U.S. Department of Treasury have ‘fire-hosed’ trillions of dollars of liquidity into the banking system over the past 5 years – in large part, ‘targeting’ major multi-national banks.

And the ‘trillions of dollars’ of bailouts have degraded the purchasing power of the U.S. Dollar… and have done little generate legitimate economic growth in the U.S. over the course of the past 5 years.

It is time for a new economic recovery plan – one that targets ground-level America by providing equal access to liquidity for American families.

The Leviticus 25 Plan.

August headlines signal… debt, fragile economies, and… (deflation)

Liquidity and debt relief are needed… at ground level.

…………………………………………………………………

The U.S.:

Fed Official Warns ‘Disappointing’ Growth Could Foretell Future…

Sluggish jobs market points to structural problems…

Wages Down 23% Since 2008…

US is Bankrupt: $89.5 Trillion in US Liabilities vs. $82 Trillion in Household Net Worth & The Gap is Growing. We Now Await the Nature of the Cramdown. – Biderman’s Money Blog
Chris Hamilton explains why the United States is bankrupt after dissecting the economy’s liabilities and assets. Read more…

………………………………

Around the world….

Japanese GDP Plunges 6.8% As Consumer Spending Collapses By Most On Record
Submitted by Tyler Durden on 08/12/2014 – 19:58

Europe Continues To Deteriorate Leading To Fresh Record Bund Highs; All Eyes On Draghi
Submitted by Tyler Durden on 08/07/2014 – 07:10

China’s “Prelude To A Storm” As Record Private Bonds Mature
Submitted by Tyler Durden on 08/06/2014 – 22:44

So Much For China? Aussie Unemployment Misses By Most On Record, Surges To 12-Year Highs
Submitted by Tyler Durden on 08/06/2014 – 21:59

Alarm Bells Ringing: Behind The Smoke And Mirrors Of The European Banking System
Submitted by Tyler Durden on 08/02/2014 – 13:01

Banco Espirito Santo Plunges 20% As Goldman Cuts Stake
Submitted by Tyler Durden on 08/01/2014 – 09:08

_________________________________________________

One plan … will appropriate liquidity, relieve debt burdens, and restore economic liberty. Everywhere.

The Leviticus 25 Plan.

“Alarm Bells Ringing” for Europe…

And, as of eight short months ago, U.S. banks appear to be exposed:

__________________________________

Nov 13, 2013 (Reuters) – “U.S. prime money market funds raised their of euro zone debt holdings in October to the highest level since August 2011 as pessimism over that region’s economy continues to abate, a report by JPMorgan Securities released on Wednesday showed.

Prime money funds’ exposure to the euro zone grew by $22 billion to $251 billion last month. Since the end of 2012, the funds have raised their holdings of that region’s bank paper by $49 billion, JPMorgan said.

The bulk of the July increase was in French and German bank debt, which grew by $10 billion to $151 billion and by $9 billion to $43 billion, respectively.”

_____________________________

And so, how are things ‘playing out’ in Europe now…?

Excerpts from Zero Hedge 08/02/2014 (Erico Matias Tavares of Sinclair & Co.)

Alarm bells in the European banking system have been ringing for quite a while but nobody seems to be listening. The roaring capital markets are just too loud.

But we have been keeping track of a few things.

Private sector lending is dropping sharply in the Eurozone…..

Periphery back in play? Very recently the second largest private bank in Portugal was caught in the bankruptcy of the Espirito Santo conglomerate, reporting the largest ever corporate loss in the country’s history just last Wednesday, and raising the specter that all might not be well in the Eurozone’s periphery……

BIS issues a(nother) warning. This should not be a surprise. In its 2014 annual report, released at the end of June, the Bank of International Settlements (“BIS”) warned that “banks that have failed to adjust post-crisis face lingering balance sheet weaknesses from direct exposure to overindebted borrowers and the drag of debt overhang on economic recovery,” with this situation being the most acute in Europe. It also stated that increases in government debt ratios in several cases appear to be on an unsustainable path. It appears that debt levels matter for (some) economists after all.

Bad loans rising. Before we had Fitch, the ratings agency, stating last May that in a sample of 124 Eurozone banks which participated in the latest stress test impaired loans increased by an average of 8% in 2013, with no less than 30 banks seeing an increase of 20%. This could have certainly contributed to the massive contraction in private sector credit that we are now seeing on its own. But there’s more.

Emerging dangers. Trillions more in fact. In February Reuters reported that European banks have loaned in excess of $3 trillion to emerging markets – a little less than the entire GDP of Germany, and more than four times the exposure of US lenders to those countries. Fitch chimed in saying that “a handful of large EU banks are materially exposed to more fragile emerging markets.”…..

Where’s the capital?  Another eye-opener came over a year ago. In April 2013, Jakob Vestergaard and María Retana at the Danish Institute for International Studies published “Smoke and Mirrors: On the Alleged Recapitalization of European Banks,” a report partially funded by the World Bank. The title says it all. According to the authors, by using broad capital measures based on risk-weighted assets European banking regulators have overstated the banks’ soundness and resilience in their stress assessments. Accordingly, “recent increases in risk weighted capital ratios have been little more than a smokescreen.”
By focusing on leverage ratios instead, the authors reached some interesting conclusions. The least well-capitalized banking sector among the larger Eurozone countries is not the Spanish or Italian… but the German, closely followed by the French! According to their estimates, a five-fold increase in equity capital is needed in order to reach “adequate” levels of soundness. It is well worth reading the entire report, including the discussion on why regulators seem to be consistently behind the ball on bank recapitalization.

Figure 1: Eurozone Government Debt-to-GDP (Maastricht Definition)
Source: European Central Bank

Sovereign debt jumps. But alarm bells should have been ringing even before that. In the third quarter of 2012, the overall government debt-to-GDP in the Eurozone surpassed 90% for the first time ever, as shown in the graph above…
Full article: http://www.zerohedge.com/news/2014-08-02/alarm-bells-ringing-behind-smoke-and-mirrors-european-banking-system

_______________________________________

And now:                                                                                                                                    August 2, 2014:  Banco Espirito Santo Plunges 20% As Goldman Cuts Stake

_______________________________________

Perspective:                                                                                                                               Thank you, U.S. Federal Reserve, for the trillions of dollars in liquidity transfusions you provided for major U.S. banks and foreign banks during the height of the financial crisis – all courtesy of U.S. taxpayers….

… so the ‘wild-eyed, fat-bet dice-rollers’ at these august institutions could ‘resume play.’

They may need a little more liquid ‘go-juice’ …. if things don’t turn around soon.

………………………………………………….

Note – there is one way to change things up, before it’s too late – for the U.S., Europe, Canada, South America…:

The Leviticus 25 Plan.

 

 

 

Dresdner Bank AG: #23 recipient of Fed’s ‘secret liquidity lifelines”

 Notes from Bloomberg  Nov 28, 2011:     

German insurer Allianz SE put its Dresdner Bank AG unit up for sale in 2008 as subprime-mortgage losses mounted.

By the time Frankfurt-based Commerzbank AG agreed to buy Dresdner on Aug. 31, 2008, for 9.8 billion euros ($14.4 billion), Dresdner was borrowing $11 billion from the U.S. Federal Reserve.

After the deal closed in January 2009 at a renegotiated price of 5.1 billion euros, Frankfurt-based Dresdner kept drawing from the Fed. The last of its loans from the U.S. central bank were repaid on July 16, 2009, more than six months after the Commerzbank deal closed.

Peak amount of debt on 7/02/2008: $18.4B

………………………………………………………………………….

The U.S. Federal Reserve was providing bail-out funds, through various credit facilities, to banking operations all over the globe during the height of the financial crisis.

Many of these banks created their own systemic toxicities – and U.S. taxpayers bailed them out.

The Leviticus 25 Plan provides the mechanism for a Citizens Credit Facility – to provide equal access to liquidity for U.S. citizens.  After all it is our money.

The Leviticus 25 Plan would reignite the economy, re-incentivize work, reduce the broad scope of dependence on government by the citizenry, provide for massive debt reduction at the family level.  And restore economic liberty in America.

The Leviticus 25 Plan.

LIBOR rate-rigging scandal – Lloyd’s Banking Group, Plc

LIBOR, the London Interbank Offered Rate, is the average interest rate (estimate) that leading London banks would pay, at a given point in time, if they were to borrow money from other banks.

Some 16 major global banking operations are believed to have been involved in ‘rate-manipulation’ schemes burned U.S. homeowners out of “billions of dollars” by consistently, artificially popping the LIBOR rate up on the first day of the month – the day when interest rates were reset for ARMs (adjustable rate mortgages).

Affected U.S. mortgage-holders were defrauded in the schemes.

LIBOR rate-rigging also cost municipalities across the U.S. billions of dollars in municipal bond costs by artificially ‘tilting’ rates against the interest rate swaps that had been purchased by municipalities, such as Baltimore, to hedge the bonds.
And these schemes affected the value of ‘swap lines’ that were held by several dozen U.S. banks, that were tied to LIBOR rates.

Reuters reported on March 14, 2014 that the FDIC was suing 16 banks that it believed were involved in LIBOR rate-rigging: “The banks named as defendants include Bank of America Corp, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings PLC, JPMorgan Chase & Co, and Royal Bank of Scotland Group PLC.”
“Other defendants in the lawsuit are Rabobank, Lloyds Banking Group plc, Societe Generale, Norinchukin Bank, Royal Bank of Canada, Bank of Tokyo-Mitsubishi UFJ and WestLB AG.”  Barclays and UBS had already settled.
……………………………………………..
Note: all of the named banks had received billions of dollars, during the height of the financial crisis, from the Fed’s “secret liquidity lifelines.”
Citigroup, peak amount received from Fed: $99.5B
Bank of America: $91.4B
RBS:   $84.5B
Barclays  $64.9B

The most recent bank to be implicated, and fined: Lloyd’s Banking Group, Plc, peak amount received from Fed during the financial crisis: $505M
___________________________________

The very banks that received billions of dollars in bailout funds from the U.S. Federal Reserve were defrauding American families, state municipalities, and other U.S. financial institutions.

American families deserve nothing less than the same access to liquidity that these banks received, from U.S. taxpayers, during the financial crisis.

The Leviticus 25 Plan