Fed’s Hoenig on Bank Bailout

While many of the large banks that received bail-out $ have repaid it, it remains largely unreported as to how they are making all the profits without making substantial loans. One likely explanation is that they receive loans at well below market rates of less than 1% and turn around and buy govt. bonds with the $, turning a risk free profit entirely sponsored by the fed. This conveniently understates the true size of the QE (money creation) program. Another huge issue with all the banks is the impossibility to asses their solvency since an important accounting rule called "mark to market" was suspended in order to keep bank financials from looking too grim. Suspending the rule allows banks to carry loan portfolios as original value instead or what they are worth at market prices. With a huge portion of real estate loans underwater, the value of those portfolios is seriously reduced, possibly permanently, but the banks do not reflect it on their books. Below market interest rate loans to banks act as direct subsidies sponsored by anyone who holds US denominated debt or cash. It is no wonder that the large, well connected banks (like Goldman Sachs) show huge profits while main street spirals into poverty.

Big banks are government-backed: Fed’s Hoenig – Yahoo! News: ca.news.yahoo.com/big-banks-government-backed-feds….html

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