« Alan Grayson: "Which Foreign Banks Got The Fed's $500 Billion?" Bernanke: "I Don't Know." (Video 7-21-09) »
(Just A Screenshot...Video Is Below)
The Prosecutor & The Chairman Get Some Alone Time
Gotta love the quick uploads on Grayson's youtube page. Former prosecutor, Alan Grayson wants details on the $553 billion in foreign central bank liquidity swaps that were issued last Fall in response to the global financial crisis. These swaps grew from $24 billion at end of 2007 to $553 billion at the end of 2008.
Specifically, Grayson wants to know who got it, how much they got, whether it is constitutional, why Congress was not consulted, and whether these swaps contributed to the near 30% concomitant rise in the U.S. Dollar? From Bernanke's testimony this morning before the House Financial Services Committee, I have transcribed the following exchange:
Grayson: "What's that (the $553 billion)?"
B-52: "Those are swaps that were done with foreign central banks..."
Grayson: "So who got the money?"
B-52: "Financial institutions in Europe and other countries..."
Grayson: "Which ones?"
B-52: "I don't know."
Grayson: "Half a trillion dollars and you don't know who got the money?"
B-52: "Um, um, the loans go to the central banks and they then put them out to their institutions..."
Grayson: "Let's start with which central banks?"
B-52: "Well there's 14 of them...I'm sure they're listed in here somewhere."
Grayson: "Who actually made that decision to hand out half a trillion dollars?"
B-52: "The FOMC."
Grayson: "Under what legal authority?"
B-52: "Section 14 of the Federal Reserve Act..."
There's much more (I only transcribed a portion of the first 90 seconds).
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Tuesday, July 21, 2009 at 4:21PM
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Reader Comments (25)
Seems I remember some conspiracy nut hatch somewhere saying the swaps were part of a coming global bailout or something -- or does that involve the IMF? (I'm sure you've all read what horrible shape some of the Swiss, Austrian, and Irish banks are in -- more bailouts coming their way, but will the Fed be involved?)
http://www.newsweek.com/id/161199
I only wish I believed him. Do you?
4/6/09 -- He then lowered his voice: "It is true, as my Italian friend has said, that the crisis began in the US. I take responsibility, even if I wasn't even president at the time." And he underscored how important it is for him "that we now genuinely make progress. Thank you." Applause.
http://www.spiegel.de/international/world/0,1518,617639,00.html
7/21/09 -- "I love these folks who helped get us in this mess and then suddenly say, 'Well, this is Obama's economy,'" the president said, pointedly deviating from his prepared text. "That's fine. Give it to me!"
http://www.chicagotribune.com/news/politics/sns-ap-us-obama-owning-the-economy-analysis,0,6546000.story
I guess you're answering my question, but I'm talking abou the currency swaps Bernanke was talking about with Grayson (not credit default swaps).
And no, I don't believe Obama at all. The Great Bloviator is pretty darn good at saying things that you want to hear, you think he gets it -- he even says "Hey, I get it" and "Let me be clear." But he doesn't, and he isn't. Smoke, smoke, mirrors and more smoke. (Do you think he still smokes?). The only difference between him and President Cheney is that everyone knew Cheney was an evil, murderous, chicken-hawk bastard. With Obama, you almost want to like the guy (well, some of us do).
Here are 2 good links n Fed (central bank) Currency Swaps:
http://macroblog.typepad.com/macroblog/2008/09/thursdays-post.html
And here's a 2nd:
http://www.marketskeptics.com/2009/04/fed-using-currency-swaps-to-boost.html
Hope this helps.
Awesome. Thanks for the links.
That is some scary $#!t! Thanks for the links. Let's hope the Fed unwinds those swaps before those $500 billion in outstanding swaps translates into another $5 trillion of foreign denominated debt if the dollar does lose 9/10 of its value against the exchanged foreign currencies as a commenter noted in the second article.
Yeah these swaps deserve watching...it would be helpful to know which individual banks got the funds from the ECB and other Central Banks.
If we're talking about banks in Greece, Spain, or eastern europe, then there is a real fear those loans will not be repaid.
The Central Banks of those nations would then be on the hook for their end of the swap.
I also am unsure about this...why in the hell would you be against the Consumer Financial Protection Agency unless you are a bank...the FED will be hurt by their opposition to this new legislation, imo.
Also, fwiw, this is now the lead story on Patrick.net tonight.
Here is how much the ECB drew over some months:
Totals of all outstanding auctions (3 maturities):
$212B as of Nov 18
$224B as of Nov 20
$236.5 as of Nov 28
$294B as of Dec 2
$267B as of Dec 10
$262B as of Dec 16
$246B as of Dec 17
$257B as of Dec 23
$254B as of Dec 30
$237B as of Jan 7
$227B as of Jan 15
$229B as of Jan 22
$186B as of Jan 27
$179B as of Feb 9
$190B as of Feb 11
$186B as of Feb 19
$135B as of Feb 24
$144B as of Feb 25
$145B as of Mar 5
$152B as of March 11
$150B as of March 18
$165B as of March 26
$164B as of April 1
$167B as of April 7
$151B as of April 8
$129B as of April 22
$129B as of April 30
$56.9 as of July 2
Perhaps the Fed has prodded the ECB into winding down the use of these swaps as they are supposed to be temporary.
The ECB/Fed are charging in excess of 1% rate for 1 week US$ while published 3 mo. US$ LIBOR is around 0.5%. Sort of a penalty rate now, begs question of why would a Euro institution still be using this facility?
the congressmans inquisition would have been more timely if he brought this up 8 months ago....better late than never.
Link:
http://www.ecb.int/mopo/implement/omo/html/index.en.html
Good question. In the spirit of constructive paranoia, does this suggest that the LIBOR as published bears little relation to actual rates? I would almost be willing to believe that this has something to do with the looming banking issues in Europe, but in that case why would they wind down the swaps? I don't remember how high the LIBOR was 6 or 5 months ago, but at one point wasn't 1% a discount to the LIBOR?
What, so he could be a fascist instead? Go troll somewhere else.
Also, not sure I get this point :
"...if he understood what he was doing, would not support Ron Paul's bill. "
Are you saying he's undermining the Democratic playbook by calling for a Fed audit?
Regardless of your views on him, how can you not regard him as an anti-bailout leader?
Excellent contribution, thanks. FWIW, everyone's comments here have been read by Congressman Grayson. He wrote a story about this video and mentioned (and gave the link) to our coverage of the hearing and questioning and mentioned he enjoyed reading the coverage and comments.
So if you have any messages for Rep. Grayson, you can add them to the comments here.
I still believe the key issue here is the safety of the swaps and the issue of their repayment....and it's difficult to make any determination because we don't know which individual banks received them.
If Rep. Grayson is indeed reading these comments, great job man! We love what you are doing and regard you as an anti-bailout leader. I wish my own congressmen didn't sell out on the bailout by flip-flopping after Senate rubber stamped that abomination. It has been refreshing to see you on so many MSM news outlets speaking the truth. Keep up your youtube video updates. They are fantastic. You are getting the word out there.
Great comments...not that you doubted us but here is the grayson guest column on naked capitalism where he mentions several aticlesw about his testimony, including ours....
http://www.nakedcapitalism.com/2009/07/guest-post-representative-alan-grayson.html
I could be completely wrong, but his article on NC smelled like it was written by one of his LAs who is a former blogger, no idea of his name...but either way, the blogosphere noise is being picked up in DC...peace out...
Sorry to be off-topic, but did anybody else notice the guy on the left sound asleep?
@ James
I honestly do not believe the Fed wants to monetize the debt, despite their quantitative easing. I've heard Bernanke discuss it enough and Richard Fisher, a severe hawk, also talk about the issue.
I think there was a massive demand for dollar reserves at the height of the crisis, and the Fed was just greasing the wheel. The dollar would have spiked even more dramatically had these swaps not been in place which would have then inevitably led to a dollar collapse right about now as the fear is finally fading and demand for riskier currencies is returning.
They're for entertainment purpose only.
You see you take a swap and you place it under half a walnut shell. Then you take two other empty half walnut shells and you SWAP them around & around after which the investor has to uncover where the SWAP is. Obviuosly they'll NEVER find it because it's up your sleeve by then!
TA -DA!
Tomorrow: an in-depth explanation of Reverse Forward Split Derivatives ..and their effects on proper bowel movements.