Randall Wray points out the difficulties and contradictions in measuring the scope of the bailout that the financial sector has received over the last four years:
Think about it this way. A half dozen drunken sailors are at the bar, and the bartender refills their shot glasses with whiskey each time a drink is taken. At any instant, the bar-keep has committed only six ounces of booze. That is a useful measure of whiskey outstanding. But it is not useful for telling us how much the drunks drank. Bernanke would like us to believe that if the Fed newly lent a trillion bucks every day for 3 years to all our drunken bankers that we should total that as only a trillion greenbacks committed. Yes, that provides some useful information but it does not really measure the necessary intervention by the Fed into financial markets to save Wall Street.
You can take snapshots, measure the commitments at any given point in time, and identify the highest level of commitment, you can sum up those commitments over some relatively brief period, or you can sum up those commitments over the entire period from 2007 to date. The Fed has inclined towards the first measure when reporting to Congress but that may not really tell the story. The total cumulative commitment was an eye-popping $29 trillion. Details of who, what, and where at the link.
The $29 trillion was obtained from public open sources. The actual number is higher, and higher is mind numbing higher. My guess is that the Fed can account for $1.5 trillion and possibly $7.7 trillion, but $29 trillion will expose their books to be spectacularly out of balance. Is it any wonder why they do not want to be audited?
This is a money laundering scheme writ large. The Fed provides a legitimate and necessary function, and its “off the books” activities piggyback on them. Using the reserves, clearing, etc. functions as camouflage, they are able to lend, purchase, and guarantee using funds that do not exist.
These “off the books” activities may be legitimate and necessary, but that is another debate.
“For the Snark was a Boojum, you see.”
The total cumulative commitment was an eye-popping $29 trillion.
😐
The actual number is higher, and higher is mind numbing higher.
No, the $5.4 trillion dollar number from a few months ago was mind numbing. The new number is unbelievable. Anything bigger than that? I can’t fathom that. We’re getting into the realm of the notional value of all derivatives. It’s all funny money at that point. The import question at this point is, “Who’s collecting the vig, and what’re their rates?”
The important thing, though, is that unemployment benefits are too long – we shouldn’t let people free-load like that. / sarcasm
Regulatory capture gets costly when the Fed is the one captured.