Welfare For Wall Street Wives

Matt Taibbi is back, and his latest piece on how you got screwed by the bailout is a jaw-dropper.  I've talked about the Fed giving no-cost, zero-risk loans to banks.  But through their "small business" loan program, TALF, the Fed basically gave no-cost, zero-risk loans to Wall Street's biggest players, and in at least two cases, their wives.

And when I say "loans" I mean the Fed backed them to the tune of $220 million in taxpayer money.

This is where TALF fits into the bailout picture. Created just after Barack Obama's election in November 2008, the program's ostensible justification was to spur more consumer lending, which had dried up in the midst of the financial crisis. But instead of lending directly to car buyers and credit-card holders and students — that would have been socialism! — the Fed handed out a trillion dollars to banks and hedge funds, almost interest-free. In other words, the government lent taxpayer money to the same assholes who caused the crisis, so that they could then lend that money back out on the market virtually risk-free, at an enormous profit.

Cue your Billy Mays voice, because wait, there's more! A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don't pay the Fed back, it's no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.

This is the deal of a lifetime. Think about it: You borrow millions, buy a bunch of crap securities and stash them on the Fed's books. If the securities lose money, you leave them on the Fed's lap and the public eats the loss. But if they make money, you take them back, cash them in and repay the funds you borrowed from the Fed. "Remember that crazy guy in the commercials who ran around covered in dollar bills shouting, 'The government is giving out free money!' " says Black. "As crazy as he was, this is making it real." 

And that's exactly what the ultra-rich did in order to keep the investment capital flowing.  And the notion that the Fed made money (and so did the banks) to pay the Fed back?  All of that is magic unicorn crap.

This whole setup — in which millionaires and billionaires gambled on mountains of dangerous securities, with taxpayers providing the stake and assuming almost all of the risk — is the reason that it's insanely premature for Wall Street to claim that the bailouts have actually made money for the government. We simply can't make that determination until the final bill comes in on all the dicey securities we financed during the bailout feeding frenzy.

In the case of Waterfall TALF Opportunity, here's what we know: The company was founded in June 2009 with $14.87 million of investment capital, money that likely came from Christy Mack and Susan Karches. The two Wall Street wives then used the $220 million they got from the Fed to buy up a bunch of securities, including a large pool of commercial mortgages managed by Credit Suisse, a company John Mack once headed. Those securities were valued at $253.6 million, though the Fed refuses to explain how it arrived at that estimate. And here's the kicker: Of the $220 million the two wives got from the Fed, roughly $150 million had not been paid back as of last fall — meaning that you and I are still on the hook for most of whatever the Wall Street spouses bought on their government-funded shopping spree.

It was a great deal if you could get it...and America's elite got the deal of the lifetime to keep their money in play, leveraged by the Fed, in order to turn a massive profit.  Only now is Congress looking into these TALF program transactions.   And remember, these two loans were just a tiny fraction of the loans that the Fed made to the fat cats.  Let's keep in mind that the banks got trillions and trillions in Fed loans because they lost trillions and trillions of dollars.  Want to know where all the national debt came from?  Take a picture of Wall Street.

And now we're being repaid by having America's social safety net ripped to shreds because "we can't afford it" anymore.  Well kids, the reason we can't afford it is the Fed gave trillions to the banks, and they're basically never going to pay it all back.

Big Casino killed this country's economy.  And us peons will be paying for it the rest of our lives.