>$29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient

There have been a number of estimates of the total amount of funding provided by the Federal
Reserve to bail out the financial system. For example, Bloomberg recently claimed that the cumulative commitment by the Fed (this includes asset purchases plus lending) was $7.77 trillion. As part of the Ford Foundation project “A Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis,” Nicola Matthews and
James Felkerson have undertaken an examination of the data on the Fed’s bailout of the financial system—the most comprehensive investigation of the raw data to date. This working paper is the first in a series that will report the results of this investigation.


The extraordinary scope and magnitude of the recent financial crisis of 2007–09 required an extraordinary response by the Fed in the fulfillment of its lender-of-last-resort function. The purpose of this paper is to provide a descriptive account of the Fed’s response to the recent financial crisis. It begins with a brief summary of the methodology, then outlines the unconventional facilities and programs aimed at stabilizing the existing financial structure. The paper concludes with a summary of the scope and magnitude of the Fed’s crisis response. The line: a Federal Reserve bailout commitment in excess of $29 trillion.





INTRODUCTION


There have been a number of estimates of the total amount of funding provided by the Federal Reserve to bail out the financial system. While the Fed at first refused to provide data on its bailout, the Congress—led by Senator Bernie Sanders—ordered the Fed to provide an accounting of its actions. Further, Bloomberg successfully pursued a Freedom of Information Act suit for release of detailed data. That resulted in a “dump” of 25,000 pages of raw data. Bloomberg has recently claimed that the cumulative “spending” by the Fed (this includes asset purchases plus lending) was $7.77 trillion. However, the reports have not been sufficiently detailed to determine exactly what was included in that total.


We have conducted the most comprehensive investigation of the raw data to date. We find that the total spending is actually over $29 trillion. This is the first of a series of working papers in which we will present our results. We hope that other researchers will compare these results with their own, and are providing detailed break-downs to aid in such comparisons.


The extraordinary scope and magnitude of the recent financial crisis of 2007-2009\ required an extraordinary response by the Fed in the fulfillment of its lender of last resort function (LOLR). The Fed’s response did not disappoint; it was truly extraordinary. The purpose of this paper is to provide a descriptive account of the Fed’s response to the recent financial crisis. In an attempt to stabilize financial markets during the worst financial crisis since the Great Crash of 1929, the Fed engaged in loans, guarantees, and outright purchases of financial assets that were not only unprecedented (and of questionable legality), but cumulatively amounted to over twice current U.S. gross domestic product. The purpose of this paper is to delineate the essential characteristics and logistical specifics of the veritable “alphabet soup” of LOLR machinery rolled out to save the world financial system. We begin by making a brief statement regarding the methodology adopted in developing a suitable method with which to measure the scope and magnitude of the Fed’s crisis response. The core of the paper will follow, outlining the unconventional facilities and programs aimed at stabilizing (or “saving”) the existing financial structure. Only facilities in which transactions were conducted are considered in the discussion (some facilities were created but never used). The paper will conclude with a summary of the scope and magnitude of the Fed’s crisis response. In later working papers we will continue to provide more detailed analysis of the spending.


To read the full report: Federal Reserve bailout commitment
RISH TRADER