Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.
It wasn’t just US banks; foreign banks got tens of billions in this secret TARP deal. The revealing thing for me is not how much the banks got — I suspected the number was in this ballpark. It’s just how scarily close we came to a complete system meltdown.
What really gets me, however, is how little responsibility has been taken for the banking collapse. Yeah, I know — it was all CRA, ACORN and the government forcing banks to lend money to poor people. But it wasn’t poor people who created credit default swaps. It wasn’t the CRA that made banks stupidly (and often fraudulently) pack mortgages into investment vehicles and sell them to each other. The massive leveraging our bank system was not ACORN’s idea. The bankers can take all the credit they want for those “innovations”. Isn’t someone going to go to jail for this mess? The S&L bailout cost a lot of money too, but at least the crooks went to jail.
In the meantime, we can rest easy knowing that this sort of debt bubble will never … what was that?
This chart looks like a mistake, but it’s correct. Student loan debt has grown by 511% [between 1999 and 2011]. In the first quarter of 1999, just $90 billion in student loans were outstanding. As of the second quarter of 2011, that balance had ballooned to $550 billion.
Obviously the number of students didn’t grow by 511%. So why are education loans growing so rapidly? One reason could be availability. The government’s backing lets credit to students flow very freely. And as the article from yesterday noted, universities are raising tuition aggressively since students are willing to pay more through those loans.
Ah, yes. Now this is one we can blame on liberal interests and politicians. They have been pushing harder and harder on the education bubble. And many want to make it worse with direct federal loans (call it Fannie Ed) or “forgiveness” of loans if someone enters a politically-correct industry.
Hang on to you wallets, guys. It’s going to get worse before it gets better.