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Friday
Jun172011

The $165B Bank Bailout That Will Never Be Paid Back

Though Treasury likes to gloat about TARP funds having been paid back by the big banks, the banks have received a back-door bailout, of almost exactly the same size, that will never be paid back.  Almost no one talks about it, and no one in government is even keeping track of it.

Out of the total $700B TARP bailout, approximately $205B were disbursed to the banks through the Capital Purchase Program (CPP).  Of that $205B, roughly $150B has actually been paid back.  One of the dirty secrets of the bailout, though, is that Treasury and the Federal Reserve found a way to give the banks money without any approval or oversight from Congress or anyone else.

By keeping short-term interest rates close to zero for the last two years, the Fed has enabled the banks to drastically reduce their interest expense on deposits, thereby inflating bank earnings by tens of billions of dollars each of the past two years.  There's nothing wrong with banks earning a profit, but the banks' reduced interest expense comes right out of your pocket.  The less you earn on your savings account or CD's, the more money the banks make -- and it's all because of this deliberate gift from the Fed.

According to the FDIC's latest figures, there are approximately $7.7T in interest-bearing deposits in US banks.  This figure is little changed from year-end 2008, when US banks held approximately $7.6T in deposits.  In other words, there are slightly more deposits being held now than two years ago just after the crisis hit, but the total amount of interest banks have paid on deposits has changed dramatically over the past three years: 

  • 2008  $166B Paid in Interest on Deposits
  • 2009  $99B Paid in Interest on Deposits
  • 2010  $67B Paid in Interest on Deposits

With dramatically lower rates on roughly the same amount of interest-bearing deposits, banks have been able to reduce their expenses by over $165B.  This isn't speculation.  The numbers here are taken directly from the FDIC's own figures.  Savers and depositors have been deprived, as a matter of policy, of over $165B in interest, which has gone instead to subsidize the profits at the big banks and the bonuses of the executives who run them.  $165B amounts to over $500 for every man, woman and child in America, or over $900 for each and every taxpayer and each of their children.  Taxpayers may have read in the headlines that the big banks have paid back all the bailout money, but the money being paid back is coming right out of their own pockets.

Go here to access the FDIC's reports (Standard Report #3 will give you the industry-wide totals):

 

 

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Reader Comments (11)

Yachts, glamour, greed and Caprice: The playboy lifestyle of billionaire brothers arrested over bank collapse

Read more: http://www.dailymail.co.uk/news/article-1364524/Robert-Vincent-Tchenguiz-arrested-Icelandic-bank-Kaupthing-probe.html#ixzz1GS1Wp21f
Mar 12, 2011 at 11:35 PM | Registered CommenterDailyBail
Mar 12, 2011 at 11:36 PM | Registered CommenterDailyBail
Mar 12, 2011 at 11:36 PM | Registered CommenterDailyBail
I did not know Tim was a Siamese twin.
Mar 13, 2011 at 3:32 AM | Unregistered CommenterS. Gompers
Outstanding and straightforward analysis here, DB. This goes straight to the quick reference links file.
Mar 13, 2011 at 10:27 AM | Unregistered CommenterCheyenne
Nice one Gomp....thanks cheyenne...credit to pitchfork on this effort...
Mar 13, 2011 at 1:50 PM | Registered CommenterDailyBail
Behind Administration Spin: Bailout Still $123 Billion in the Red

http://www.propublica.org/article/behind-administration-spin-bailout-still-123-billion-in-the-red

Federal Reserve wild financial beast of Maiden Lane – How the Fed silently helped Hilton and Waldorf properties for the benefit of JPMorgan while placing the cost on working and middle class Americans.

http://www.mybudget360.com/federal-reserve-financial-beast-maiden-lane-commercial-real-estate-bailout-hilton-waldorf-jpmorgan-bank-fed/

Unlimited credit for GSEs seen as backdoor bailout

http://www.reuters.com/article/2010/01/05/us-usa-housing-bailout-idUSTRE6044YU20100105
Mar 18, 2011 at 12:46 AM | Unregistered CommenterLiberatedCitizen
Great links...thanks for those...
Mar 18, 2011 at 1:11 AM | Registered CommenterDailyBail
Is the little yellow bird with the broom telling me to clean my speech? Good, Better than my folks scraping my teeth with soap.
Anyway. If they just print up the money for us to borrow, God and justice and the Constitution tell us to print up money to pay back the entire debt and that's that. Inflation? Perish the thought. The provision to buyout the Fed by the government should be paid in the same new U.S. based currency. If they don't like it, we can bomb the hell out of THEM for a switch. These financial, military, chemtrail/HAARP > weather disaster in 48 hour, and Fukushima attacks all had their financial oversite. We can't take much more of this unchecked, undeserved destruction. Congress is too busy mewling and Obama is too much of a traitor to react in America's favor. Kick in the picture screen of your CFR controlled TV set, TODAY. Pick up something heavy and get busy.
Jun 21, 2011 at 1:52 AM | Unregistered CommenterHoward T. Lewis III

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