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Thread: Wall Street Borrowed From Fed at 0.0078 Percent

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  1. #1
    Havakasha is offline
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    Wall Street Borrowed From Fed at 0.0078 Percent

    I sure wish i could get that kind of loan. Where do i sign up?

    Money For Nothing: Wall Street Borrowed From Fed At 0.0078 Percent
    First Posted: 12- 1-10 05:19 PM | Updated: 12- 1-10 08:42 PM

    NEW YORK -- For the lucky few on Wall Street, the Federal Reserve sure was sweet.

    Nine firms -- five of them foreign -- were able to borrow between $5.2 billion and $6.2 billion in U.S. government securities, which effectively act like cash on Wall Street, for four-week intervals while paying one-time fees that amounted to the minuscule rate of 0.0078 percent.

    That is not a typo.

    On 33 separate transactions, the lucky nine were able to borrow billions as part of a crisis-era Fed program that lent the securities, known as Treasuries, for 28-day chunks to the now-18 firms known as primary dealers that are empowered to trade with the Federal Reserve Bank of New York. The program, called the Term Securities Lending Facility, ensured that the firms had cash on hand to lend, invest and trade.

    The market was freezing up. Effectively free money, courtesy of Uncle Sam, helped it thaw.

    The European firms -- Credit Suisse (Switzerland), Deutsche Bank (Germany), Royal Bank of Scotland (U.K.), Barclays (U.K.), and BNP Paribas (France) -- borrowed $5.2-6.2 billion in Treasuries 20 different times. The one-time fees they paid on each transaction ranged from $403,277.78 to $481,110. Deutsche led the way with seven such deals.

    On each transaction, the fee paid for the 28-day loan is equal to a rate of just 0.0078 percent.

    The first of these sweetheart deals began April 17, 2008. They ended nearly a year later on March 5. On that day, Goldman Sachs borrowed about $5.8 billion and paid just $450,000 for the privilege.

    Goldman was one of four American firms that also paid that rock-bottom rate. Citigroup, defunct investment bank Lehman Brothers, and Merrill Lynch, which was gobbled up by Bank of America in a government-pushed transaction, benefited from the save-Wall-Street-at-all-costs approach. Goldman and Citi got the 0.0078 percent rate on five separate occasions, tops among U.S. banks.

    The transactions highlight the extraordinary steps taken by the Fed -- and encouraged by both the Bush and Obama administrations -- to save Wall Street from its own mistakes. Households and small businesses have not been as lucky.

    The Fed's crisis-era programs "provided liquidity to particular institutions whose disorderly failure could have severely stressed an already fragile financial system," the Fed said in a statement Wednesday posted on its website. A spokesman did not respond to an e-mailed request for comment.

    This year, Wall Street is poised to break yet another record for employee compensation and bonuses. Thanks to near-zero percent interest rates -- also set by the Fed -- firms are able to continue making easy money with minimal risk.

    *This story was updated at 8:30 p.m. ET. An earlier version of this article misstated the rate paid by the firms, the number of transactions, the amount of the fee, which varied by transaction, and incorrectly defined the rate itself. The rate, which was a fixed fee and not a traditional interest rate, was 0.0078 percent, not 0.0077 percent. There were at least 33 such transactions, not 31. And the actual fee paid ranged from $403,000 to $481,000, rather than a fee of about $384,000 for all of the transactions.


  2. #2
    SiriuslyLong is offline
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    I sure wish i could get that kind of loan. Where do i sign up?

    Go see Obama.

  3. #3
    Havakasha is offline
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    The Republicans can help you out. They seem to know how to help the rich out quite well.
    As a matter of fact they are right now trying to give the very rich a tax break people like Buffett, Gates, Soros are BEGGING not to have.
    Last edited by Havakasha; 12-03-2010 at 12:25 PM.

  4. #4
    Havakasha is offline
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    The Best Tax Cuts Go to the Rich
    i guess i should have added !!! for emphasis just like S&L.

    S&L is probably shocked by this report ( ),
    and i am convinced he supports
    the attempts to change this so that
    middle class families dont pay more
    than their fair share.

    The Forbes 400
    The Best Tax Breaks Go To The Rich
    Janet Novack, 09.24.10, 03:40 PM EDT
    Forbes Magazine dated October 11, 2010
    The Forbes 400 will pay higher rates in coming years--but not as high as the millionaire next door.

    For the 400 richest Americans, 2010 may go down as the best year ever when it comes to paying taxes. A fixture since 1916, the federal estate tax lapsed on Jan. 1, potentially saving huge sums for the heirs of Metromedia founder John Kluge, Texas pipeline tycoon Dan L. Duncan, Yankees owner George Steinbrenner and other billionaires who died this year (see "Departures").

    The top individual tax rate on long-term capital gains has stood at 15% since 2003--its lowest since 1933. Because the top 400 earners derived two-thirds of their $345 million in average gross from gains, they got clipped by an effective tax of only 16.6% in 2007 (the latest available year), down from 29.9% in 1995. "As long as capital gains are taxed at a lower rate, the top 400 will pay less than the merely rich,'' says Leonard Burman, a Syracuse University professor. Indeed, the merely rich--those with adjusted gross of $1 million to $5 million--paid 24% because more of their income comes from salary and other earnings taxed at a 35% rate.

    The good times can't last. Congress is still deciding whether to allow the top gains rate to return to 20% when the Bush tax cuts expire at the end of 2010 and what to do about the estate tax, which springs back to life come Jan. 1, 2011. Capitol Hill has already adopted a 3.8% surtax on gains, effective in 2013. States, too, are raising taxes on the rich. In November Washington State residents will vote on an initiative backed by Bill Gates Sr., father of Microsoft ( MSFT - news - people )'s cofounder, to impose a new income tax only on high-income folks. Above $1 million per couple, it would grab 9%.

    When taxes do rise, the wealthy won't be able to avoid them with edgy shelters, as some have in the past. Texas banker and rich lister Andrew Beal is now appealing a federal district judge's ruling disallowing $1.1 billion in paper tax losses he generated from a $19 million investment in junk Chinese debt. The government says Beal used this technique "to stockpile over $4 billion in artificial losses to shelter future income." The judge ruled the losses lacked "economic substance" but didn't impose penalties on Beal, finding he had "reasonable cause" to believe his strategy would work. In March Congress eliminated that defense to penalties for future shelters lacking economic substance.

    Then there's the Internal Revenue Service's creation of special "high wealth" squads to audit the rich and its ever more effective pursuit of offshore accounts. The Swiss are now handing over files on 4,450 Americans who had secret accounts at UBS ( UBS - news - people ) AG. Rich lister Igor Olenicoff has pleaded guilty to lying on his tax return about $200 million he kept offshore, including at UBS.

    So will the plutocrats have to ante up more tax? Yes, but if the gains rate goes too high, they'll delay selling assets--cutting tax revenue, warns Michael Graetz, a Columbia Law School professor. Says he: "They obviously don't need the money for lunch."

    The Richest People in America

  5. #5
    SiriuslyLong is offline
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    Well that didn't take long. Back to the rich LOL. 400 people are going to solve the nation's problems. Hilarious.

    Soros, Buffet, Gates - hmmmm, something in common?

    Remember one thing my friend, I don't give a shit about taxing the rich. We do need the money. I do find it appauling that you and those like you obsess on them though.

  6. #6
    Havakasha is offline
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    Why are the Republicans fighting so hard to keep taxes abnormally low for the ultra rich. You never seem to explain it.

    "I dont give a shit about taxing the rich" hmmm.

    So you must be REALLY upset about the Republicans holding up the tax cuts for us middle class people to make sure the rich are keeping theirs? And you must be upset that Corporations have record profits but unemployment is almost 10% and you must be really upset that the income disparity in this country is growing so wide? LOL.

    I can really feel your outrage in my bones. You are so utterly transparent S&L and yet you seem to have no idea.
    Last edited by Havakasha; 12-03-2010 at 12:52 PM.

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