Wall Street on Parade has discovered that three of the Fed’s programs used to monetize bad assets on the big Wall Street Bank balance sheets have been removed from the Fed’s monthly reports to Congress. The programs were legacy bailout facilities from the 2008 bailout program that had been resurrected in March 2020: the Primary Dealer Credit Facility (PDCF); the Commercial Paper Funding Facility (CPFF); and the Money Market Mutual Fund Liquidity Facility (MMLF). The transaction details no longer available to Congress and the public include the names of the recipients and the dollar amounts received.
Coincidentally, I was discussing with a colleague just last week the fact that, despite the fact that a large portion of commercial real estate loans outstanding are non-performing, we never hear about the fallout from this. It’s my belief that the Fed is monetizing TBTF bank exposure to distressed CRE assets, which include $100’s of billions in gross exposure via credit default swaps. Per the latest OCC quarterly report on bank trading and derivatives activity, the notional value of credit derivatives at the end of March at the top 25 commercial banks was $3.36 trillion. The notional amount of all derivatives (central cleared and OTC) was $189 trillion, most of which are OTC (not centrally cleared and therefore much higher risk).
As Wall Street on Parade points out, much of what the Fed does is hidden from public oversight. A report from the GAO in 2011 revealed that:
“The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression…”
As WSoP also discovered, a follow-up report from a private organization showed the total bailout from 2008 was $29 trillion.
The amount of money printed by the Fed and handed to the banks is just part of the Fed’s great hyperinflationary bank bailout policies. With the removal of three key bailout programs from public purview, its likely that the Fed’s clandestine monetization of distressed bank assets is about to go into over-drive – 2008-2010 on steriods. Is this what the Fed wants to hide?
It’s worth reading the entire report from WSoP: Three of the Fed’s Wall Street Bailout Programs Vanish from Its Monthly Reports to Congress