Goldman Sachs Reaps and Reaps and Reaps Cash (Secretly)

Trying to keep track of all the money that Goldman Sachs received in bailout funds (both short-term and long-term) could be a full-time job. From an earlier post, I found out that Goldman Sachs had accumulated a large amount of financial help from various sources:

Here's another analysis of the FCIC report, including a comment on Goldman Sachs's ever-increasing amounts of money achieved via the Financial Crisis. Goldman Sachs was given $10 billion in TARP funds, $12.9 billion in AIG TARP funds for GS counter parties , $1.9 billion for its own use from AIG's TARP bailout; $5 billion investment from Buffet, and $589 billion in total short-term loans from the Federal Reserve (PDCF) and $193 billion from TSLF throughout 2008 and 2009!

Now we see that Goldman Sachs received money from another Federal Reserve emergency lending fund: ST OMO (single-tranche open-market operations). These 28-day loans were made from March to December 2008 and Goldman Sachs borrowed at least $30 billion from the fund.

Are we to believe that this revelation marks the end of the funds Goldman Sachs received? Ha!

Fed Gave Banks Crisis Gains on Secretive Loans Low as 0.01%
By Bob Ivry - Bloomberg Businessweek

May 26 (Bloomberg) -- Credit Suisse Group AG, Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.

The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.

Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.

“This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”

The Federal Reserve Bank of New York, which oversaw ST OMO, posted aggregate data about the program on its website after each auction, said Jeffrey V. Smith, a New York Fed spokesman. By increasing the availability of short-term financing when private lenders were under pressure, “this program helped alleviate strains in financial markets and support the flow of credit to U.S. households and businesses,” he said.

Not in Dodd-Frank

Congress overlooked ST OMO when lawmakers required the central bank to publish its emergency lending data last year under the Dodd-Frank law.

“I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.

Records of the 2008 lending, released in March under court orders, show how the central bank adapted an existing tool for adjusting the U.S. money supply into an emergency source of cash. Zurich-based Credit Suisse borrowed as much as $45 billion, according to bar graphs that appear on 27 of 29,000 pages the central bank provided to media organizations that sued the Fed Board of Governors for public disclosure.

New York-based Goldman Sachs’s borrowing peaked at about $30 billion, the records show, as did the program’s loans to RBS, based in Edinburgh. Deutsche Bank AG, Barclays Plc and UBS AG each borrowed at least $15 billion, according to the graphs, which reflect deals made by 12 of the 20 eligible banks during the last four months of 2008.

Read the full article here

Read the contrarian view of "secrecy" here