US Economy
The Real Housewives of Wall Street: Rolling Stone asks about dubious Federal Reserve lending of $220m
By Michael Hennigan, Founder and Editor of Finfacts
Apr 17, 2011 - 3:16 PM

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The Real Housewives of Wall Street: Last December, the Federal Reserve reluctantly agreed to release details of a crisis emergency loan program of $3.3trn in which foreign banks were among the biggest beneficiaries and this week, Rolling Stone magazine reported on a curious series of loans amounting to over $220m.

The author of the Rolling Stone article is Matt Taibbi who won fame last year for a colourful article on Goldman Sachs, the investment bank: "The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates."

The Fed had provided details of more than 21,000 transactions with banks under several programs dating from 2007, including the Term Auction Facility (TAF).

Barclays which acquired the US operations of Lehman Brothers in September 2008, borrowed a cumulative $232bn from the TAF through various subsidiaries. Other borrowers included Allied Irish banks, Bank of Ireland, Bank of Scotland, Royal Bank of Scotland,  Société Générale, Dresdner Bank and Bayerische Landesbank  and Dexia of Belgium

In his latest article, Matt Taibbi, relied on information passed to him by the office of the socialist and independent US senator, Bernie Sanders of Vermont.

The reporter says if you want to get a true sense of what the "shadow budget" is all about, all you have to do is look closely at the taxpayer money handed over to a single company that goes by a seemingly innocuous name: Waterfall TALF Opportunity. At first glance, Waterfall's haul doesn't seem all that huge - - just nine loans totaling some $220m, made through a Fed bailout program. That doesn't seem like a whole lot, considering that Goldman Sachs alone received roughly $800bn in loans from the Fed. But upon closer inspection, Waterfall TALF (Term Asset-Backed Securities Loan Facility) Opportunity boasts a couple of interesting names among its chief investors: Christy Mack and Susan Karches.

Taibbi says Christy is the wife of John Mack, the chairman of Morgan Stanley. Susan is the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley's investment-banking division. Neither woman appears to have any serious history in business, apart from a few philanthropic experiences. Yet the Federal Reserve handed them both low-interest loans of nearly a quarter of a billion dollars through a complicated bailout program
that virtually guaranteed them millions in risk-free income.

The Willamette Weekly April  on who pays taxes in the US

MSNBC interview:


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