Feds Didn't Bail Out Lehman, They Just Loaned Them $87 Billion

Effectively, the Feds loaned the global financial firm Lehman Brothers $87 billion Monday as it filed for bankruptcy and sent Wall Street into even more of tizzy, CNBC reports. In order to “to avoid disruption of financial markets,” the feds asked JP Morgan Chase to advance Lehman the 87 really big ones, then the Federal Reserve Bank of New York repaid Chase. Wait, wasn’t everyone patting the government on the back for not bailing out Lehman? Looks like that was only half of the story. Your tax dollars at work.

Fed Repaid JPMorgan $87 Billion for Lehman Financing [CNBC] (Thanks to The Larsons!)

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  1. I made a joke yesterday that the Fed borrowed the money from someone else.

    I thought it was a joke.

  2. taking_this_easy says:

    first airlines, now financial firms…

    sigh

  3. Gopher bond says:

    So now the Feds have a controlling ownership in AIG? It’s like if the Fed wants something, they can just get it. Hmm, funny how that works out.

    Merry Christmas Feds,

    From me.

  4. All I know is it’s certainly fun to turn on Google’s live ticker and watch my portfolio plummet: down another 5% so far today, which is on top of the 3% or so yesterday, and the 30% or so for the year.

    Almost makes me think that nows the time to start searching for bargains.

    • RedwoodFlyer says:

      @Michael Belisle:

      Start shorting! I’m making a killing on shorting airlines every time oil goes up! Now, however, United (UAUA) will probably loose money as oil goes down since in all their genius, they decided to hedge at the peak.

  5. donovanr says:

    How much are the bigwigs in Chase, Lehman, and JP getting in commissions when they are handling these 10’s of billions? In many of these transactions they can take quite a few percent.

    Let’s be generous and say only 2% on this latest 87 Bil.
    That still works out to 1.74 billion dollars. For doing what; saving their friends asses? If you don’t think that they aren’t taking their “due” then you haven’t met any of these people.

  6. Yay … weren’t our stimulus checks supposed to prevent this stuff? (HAHAHAHAHAHAHAHA!!!!)

    One of the reasons for these “loans” is to prevent impact to the global economy. Honestly why can’t we just be honest and say we have to keep these bloated businesses afloat because if they crash the people we owe money to are gonna come calling?

    • @TakingItSeriously: Weren’t our stimulus checks supposed to prevent this stuff?

      No, those were supposed to distract from reality us just long enough to keep us happy and vote our leaders back into office.

    • cerbie says:

      You know my comment on the other AIG post? Yeah, I’m not holding that position. This is new info to me. It’s not a bail out…but now it’s less a loan, and more a hostile take-over.

      I don’t like this. I don’t see entirely where it’s going, but I don’t like it. I’d love to think that it will mean quality regulation in the future, and that big banks will be more responsible. I know that will not happen, though, so I just see a tighter credit situation, further devaluing of the dollar, and nothing that could boost it.

  7. Gopher bond says:

    Insurance groups are very large players in Federal Reserve securities but have mostly fallen under state regulations where the Feds have very little sway. But now it seems that the investee is lending money to the investor. Wonder if more insurance money will be directed towards whatever the Fed wants now. Damn those guys are good.

    My head hurts.

    • Invective says:

      @testsicles: Not to be, okay yes to be… It seems a whole lot of people have really no clue what is going on, or why. The big cable news shows have so called experts that haven’t done their homework. This is neither funny, nor a good thing. America’s finances are in deep trouble. I wrote why earlier on this website, but the effects are not over yet.

      Banks wrote loans, called them Investment Vehicles. Because certain legislation was introducted in 2005 that said if you call them Investment Vehicles, you (The banks) can play with betting on the economy outside the normal regulated banking universe. Later, banks realized that they needed insurance, but didn’t want to call it insurance, since that could bring them back into the regulated insurance industries, so another name was made up and insurance companies started writing these contracts up, by the *millions* . Billions in loans were traded, billions in insurance policies were traded and none of it was kept on the books. This is why it’s called “Open Ended Debt”, which simply means they have NO idea how much money has been lost, except for the CEO’s and CFO’s, etc. So why buy a bank, or an insurance company when you have no way of knowing for sure how many of these loans, or policies went out. You don’t. Also, neither does the Fed, nor the so called experts. I saw an idiot woman on the tv say that NYC insurance companies are in fine shape. Truth is she has no clue if they are, or not. She’s taking the word of others…
      The Feds are trying to do several things while performing a separate balancing act. One is obvious, to keep this thing from collapsing further, the other is keep it hidden from the world what really happened and how bad it is. The political consequences is devastating, should people finally bother to figure out what politicians did this thing to us. In any event, our States are feeling the financial burden from the after affects and will continue to do so for some time to come. The balancing act comes from the oil industry that is putting the squeeze on Americans by raising prices so Americans will agree to just about anything they ask for. Nobody seems to get this either. Gas and fuel prices run in an artificial market, that is controlled by the gas companies themselves. However, our economy cannot suffer this great experiment and it’s driving our economy to the brink. If it were up to me, I’d have every oil company executive and those who are in with them in jail right now for terrorising the American people and it’s political system, at a particularly bad time in history. Each and every little PAC politician has had his, or her charts, diagrams, sticky pads and pointers out so they can show us how bad we need to drill oil, so they can collect revenue sharing and steal from those funds, just like how they steal funds from everything else and use it for their own political purposes. Keep re-electing stupidity and expecting a different result. I’m praying for a change of the guard, if for no other reason, but to clear out the corruption currently in place… Bunch a damn dumb Lemmings arguing over the scraps, while other countries are poised. Believe it.

  8. lonebannana says:

    Bring On the Zombie Apocalypse!

    —-

    That is the extent of my retirement plans…

  9. howie_in_az says:

    How can I get in on this $87 billion loan deal? I’ve been keeping my eye on some Ferraris, Bentleys, and Veyrons. I’ve whiped up a quick business plan (“do business. fail. have gubment pick up tab”), who do I submit it to? president@whitehouse.gov?

  10. metsarethe... says:

    I’d rather see this than the damage of having AIG go out of business. From the looks of it. This may be one of the more benifical moves.

  11. lightaugust says:

    Next person that praises the free market within earshot of me is getting it.

  12. ThickSkinned says:

    Every day we get closer to a peasant uprising in this country. The government has lost its fear of the people. It’s time for that fear to be reinstated in a big, big way.

    • ARP says:

      @ThickSkinned: You of course know that if you disagree with the current government or stop shopping, that you hate the troops and want the terrorists to win?

      A peasant uprising won’t happen. We’re too worried about a terrorist attack, that Target workers don’t say Merry Christmas, or someone will raise our taxes. All the while, everything else collapses around us.

      Back on Topic- Obviously, they’re stretching this “loan” thing. Yes, we did loan them money. In exchange, we’re now a majority shareholder. The problem is that we probably won’t require any reforms, pay cuts, etc. We won’t even change leadership. They know this, so they can continue to engage in risky behavior and line their own pockets. They now know that we won’t let them fail, no matter how stupid they are.

  13. m4ximusprim3 says:

    So, wait, why didn’t the fed just loan the money in return for a controlling interest? If you’re gonna prop them back up, at least make some cash back when they’re succesfull again.

  14. opsomath says:

    ahem. effectively. not effectually.

  15. crazypants says:

    I’ve always heard that if we legalized marijuana and taxed it like we do gas, cigarettes or alcohol, we would have enough to pay off the debt and then some.

    So… does anyone have any thoughts on that?

    • gareki.ga.haikyo.ni says:

      @crazypants: I have always hated the idea of “taxing the hell out of marijuana”. The primary advantage of decriminalizing drugs is that you reduce violence and peripheral – and victim-FUL – crime by a great deal – but that’s only if the drugs are priced so low that gangs and drug dealers simply can’t compete with the state-run dispensaries. If you “tax the hell” out of marijuana then there is still room for competition and gangs are still able to make enough money from the sale of drugs to buy the bullets and guns with which they harass and torment decent people.

      I also hate the idea that marijuana is the only drug that should be legalized, for the same reasons stated above, and because it’s irrational to have some drugs legal and other drugs which are just as – or nearly as – deleterious illegal. (It’s redolent of “I got mine. Fuck the rest of ya’s” thinking that humans are so fond of. That is, people who like marijuana fight only for the decriminalization of marijuana and ignore other drugs because they personally don’t have any interest in them. The thing is, if you are unwilling to fight for the causes and freedoms of others – even when you aren’t particularly interested for your own sake – who’s going to help you when it comes time for you to champion your own cause? Society works because people give and take, make sacrifices and receive the fruits of sacrifice. Republicans are people who fail to see the merit of this form of thinking, themselves having a “Fuck you! I shouldn’t have to lose my ‘hard-earned’ money (read: money they obtained by taking advantage of poor people, which constitutes in a sense, redistribution of wealth) to help poor people! Screw social welfare programs cuz’ they don’t help me!”)

      Anyways, it would certainly be a boon to our economy, because currently we are spending billions a year to fight a war on drugs. The purported reason, the pretext, for criminalizing drugs was the preservation of the people’s health, but look what has happened: drug prohibition actually INCREASES drug-usage rates and INCREASES the impurity of drugs and thus their danger and this increased danger increases medical costs and so forth. It also costs a great deal to house prisoners and furnish them with all necessary amenities.

      A great irony is that with drugs illegal organizations step forward to satisfy the demand that will probably always exist that some might call terrorist organizations! The war on drugs then, which can never be won and which costs untold amounts of money, partly necessitates another war, which can never be won and costs untold amounts of money, the war on terror. (The primary source of income of terrorists is sale of drugs.)

      Whom is anti-drug law helping besides corrupt politicians and the like? The government is supposed to exist for and by the people; the people clearly want to use drugs, but they aren’t able to and in fact when they violate these despotic laws they are thrown in jail losing years of their one and only life simply because they wished to achieve pleasure by putting a chemical substance into their bodies, implying that the government owns our bodies and has the right to do with them as they please!

      /Sorry for the length, taedium, and desultoriness of this post, but I am currently on drugs and am hardly able to sustain a coherent train of thought. :) That and this is a very important topic to me and I like to spread the word whenever I can. I frequently find myself purple in the face and shaking with rage when I think of the injustice of the status quo and how willing stupid brainwashed Americans are to comply with and abet the corruption and injustice that ruins their lives and mine.

      //There truly are NO words to describe the dogmatism, stupidity, indoctrination, greed, and irrationality of your average American and congressman. Human beings are completely hopeless.

      ///Good read:

      [en.wikipedia.org]

  16. pschroeter says:

    Is history repeating itself? Didn’t the Feds go to the actual banker JP Morgan to shore up the stock market in an attempt to stop the the slide into the Great Depression?

  17. LogicalOne says:

    I heard some expert on TV say that if the Fed had taken action last Friday instead of waiting until they did, the loan amount would have been “only” $20 billion.

  18. johnnya2 says:

    Why and since when should the federal government be in the business of picking winners and losers on Wall Street? Lets pretend everything works out fabulously for AIG and they go back to making billions of dollars. What about Lehman? What about the myriad of other companies that ended up going out of business due to immoral, illegal and stupid business propositions? If AIG fails some other company will pick up the pieces and the taxpayers wont be responsible for it. Let them rot and die like the pieces of shit they are.

  19. INsano says:

    I’ve decided, after a careful review of my impact on others, that I’m too big to fail. Now pay off my school loans.

    • Trai_Dep says:

      @INsano: If I begin a crash-course of Twinkies and Carls Jr burgers, can I become To Big To Fail as well? I’ll have student loans coming up pretty soon as well…

  20. gareki.ga.haikyo.ni says:

    My preceding post is full of errors of all kinds. Sorry. I’m on hydrocodone right now, as it happens. (legally obtained)

    /SSRIs completely fail at alleviating my depression and opiates are the only substances which have demonstrated an ability to do that. This is the primary reason I oppose anti-drug law. I need this stuff to be happy and enjoy life, but if I obtain it illegally then I go to jail for who knows how many years. And why? What threat do I pose to society? The euphoria that is invited with the consumption of hydrocodone hurts whom and in what way? If it hurts no one then it is a victimless act and why should we be in the business of punishing “crimes” that have made a victim of no one? The idea of anti-drug law is to preserve the happiness and health of the people and yet how much health and happiness does it create to languish and rot in prison for 20 years? Despite all this, few people oppose anti-drug law or oppose it strongly. Baffling.