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.