How financial aid was used by US banks

The assets of the US central bank

In April 2009, Mr. Bernanke presented at the Credit Markets Symposium in Charlotte, North Carolina, the balance sheet of the US Federal Reserve. The balance sheet consists of the assets of the Federal Reserve and its liabilities. We will only consider the assets of the US central bank.

The assets of the Federal Reserve have increased considerably as a result of Federal Reserve aid to the financial sector from August 200. In April 2009, short-term liquidity programs for financial firms totaled $ 860 billion. $. Online installment loans to borrowers and investors including Commercial paper funding facilities (CPFF) and Term Asset-Backed Secured Loans Facilities (TALF) accounted for $ 255 billion. $ 780 billion was made up of high-quality assets for which liquid loans consisted: Treasury securities ($ 480 billion), government-backed corporate debt (GSE such as Fannie Mae and Freddie Mac), securitized mortgage loan packages (MBS).

The money injections to finance the financial sector amounted to $ 1895bn in the spring of 2009, to which should be added JP Morgan support to buy Bear Sterns or support AIG. In the end, the total assets of the FRB were $ 2069,605 billion as of April 9, 2009.

With a balance of $ 2088 billion as of September 17, 2009, we must note that the effort of the Federal Reserve has not weakened. The US Federal Reserve continues to support the financial system. Against the liquidity it offers, it has received in return receivables – often dubious not ceasing to lose value because of the erosion of the price of their real counterpart (real estate, buildings for commercial use …). One thing is certain, the treasury bills held by the Federal Reserve represents $ 758 billion to date. This is the only part of its balance sheet that has proven solid, the rest of the guarantees offered by borrowers in the form of pledged debt securities are of uncertain quality and value.

The purpose of this post is not to review the record of the Federal Reserve

One year after the bankruptcy of Lehman Brothers and the revelation of the difficulties of Freddie Mac, Fannie Mae and AIG, a question arises: what was the effective counterpart of the rescue of the entire financial system by the Federal State and the US Federal Reserve.

This question can be stated in a simple way: Has the liquidity offered to come to support the credit to the economy in connection with the widening of the budget deficit where the financial sector has pocketed the money to use it to its convenience without any consideration for the American economy. The question posed propels us into the highest parts of politics and finance. The crisis, in fact, raises the question of the autonomy of the financial sector, but also of the nature of the relations between politicians and men of money.

This question is not without interest for France where it is found that public aid has not resulted in a revival of credit to consumers and businesses. The American case, therefore, deserves careful consideration because France and the US have in common that they have not demanded any serious commitment from the financial sector since emergency aid has not been conditioned.

In France and the US, it is the banks that are on the front line to report this problematic relationship. These must be considered because they were heavily affected by the crisis but also generously helped by the authorities who recapitalized them. It is only the USA that will be the subject of this post, but the remarks made about the USA are not without interest for France where the political power has multiplied the incestuous relations with the business world.

US banks account for roughly 40% of the credits granted to the economy. The remaining credits to the economy are provided by the financial market in the form of bond or equity issues. The credits granted to the economy are divided into consumer credit and business credit. We will follow this order to examine in detail the balance sheet of US banks. We will then be led to consider bank investments. We have taken all the banks residing in the USA since the aid is accessible to any banking establishment operating on American soil.