What I don't understand is: WHERE DID ALL THAT MONEY GO?

[Octafish]

When the banks were getting the trillions in bailout cash from The Fed, it was sold as a "short term loan" to keep the Big Banks that were Too Big to Fail afloat.



So, the question I gotta ask is: Where did all the money go that needed to be replaced by the U.S. taxpayer at the aforementioned Big Banks?

Switzerland?

[HiPointDem]

1. i read somewhere that the touted business profits are a function of gov't spending -- i.e. gov't

is the main source of business profits currently.

can't remember where i read it though. an economics blog.

[Octafish]

15. Interesting. While corporate profits are at all-time highs, wages are at all-time lows...

"Wages as a percent of the economy are at an all-time low. This is both cause and effect. One reason companies are so profitable is that they’re paying employees less than they ever have as a share of GDP. And that, in turn, is one reason the economy is so weak: Those 'wages' are other companies’ revenue." -- Business Insider

SOURCE: http://www.classwarfareexists.com/corporate-profits-just-hit-an-all-time-high-wages-just-hit-an-all-time-low/#axzz21vx8LEO7

[harun]

2. It went to cover defaults on mortgages

Beyond that it get's blurry

[Octafish]

17. Seems like WallStreetBigBanks are laughing all the way somewhere, courtesy of US taxpayer.

...a most blurry place, when it comes to getting some restitution, evidently.

How AIG fell apart

By Adam Davidson

Thu Sep 18, 2008 1:55pm EDT

(The Big Money) When you hear that the collapse of AIG or Lehman Bros. or Bear Stearns might lead to a systemic collapse of the global financial system, the feared culprit is, largely, that once-obscure (OK, still obscure) instrument known as a credit default swap.

SNIP...

Who sells these CDSs? Banks, hedge funds, and AIG.

It's easy to see the attraction. Historically, bond issuers almost never go bankrupt. So, many banks and hedge funds figured they could make a fortune by selling CDSs, keeping the premium, and almost never having to pay out anything.

In fact, beginning in the late '90s, CDSs became a great way to make a lot more money than was possible through traditional investment methods. Let's say you think GE is rock solid, that it will never default on a bond, since it hasn't in recent memory. You could buy a GE bond and make, say, a meager 6 percent interest. Or you could just sell GE credit default swaps. You get money from other banks, and all you have to give is the promise to pay if something bad happens. That's zero money down and a profit limited only by how many you can sell.

SNIP...

Banks all over the world bought CDS protection from AIG. If AIG is not able to make good on that promise of payment, then every one of those banks has lost that protection. Overnight, the banks have to buy replacement coverage at much higher rates, because the risks now are much worse than they were when AIG sold most of these CDS contracts.

CONTINUED...

http://www.reuters.com/article/2008/09/18/us-how-aig-fell-apart-idUSMAR85972720080918

AIG -- just one company -- was bailed out to the tune of $1.6 Trillion with a T.

I'd like to know who it was who profited from their misfortune.

[Romulox]

3. A lot (perhaps even most) of that money went overseas. nt

[Octafish]

18. Keeping Offshore Invisible: A Study in News Management

Someone else who agrees:

Keeping Offshore Invisible: A Study in News Management

On Sunday July 22nd this was the Observer s front page:



The newspaper drew on a report by James Henry for the Tax Justice Network called The Price of Offshore Revisited. In it Henry estimated that the rich have hidden between $21 and $32 trillion offshore. This is only financial wealth. It does not include property. Some of the money has come from resource-rich countries with inadequate capital controls, some of it comes from the proceeds of criminal endeavour, some of it from tax avoidance.

(You can find the full report, and some background information here.)

On Sunday the BBC featured Henry’s report and interviewed its author. The interview is here. The presenter suggested that ‘this money could really turn things round … for the world economy’. He’s right. $21 trillion is quite a lot of money, however you look at it. He then went on to ask what share of it came from the UK. Henry explained that ‘oddly enough, it is easier to tell you how much is going out of countries like Brazil and Mexico than it is Britain’. This is what you would expect if Britain was the centre for a network of financiers, accountants and lawyers that provide much of the back office for global capitalism. Which it is.

(In the online write-up a tax expert and government adviser called John Whiting cast doubt on the figures. If it was that much, he said ‘you would expect the havens to be more conspicuously wealthy than they are’. This level of argument is standard in attempts to minimise the significance of offshore. They really don’t want a debate if one can be avoided.)

James Henry’s report looked set to dominate the news cycle for at least a day or so, before the Olympics coverage kicked in. It might have informed reporting of Mitt Romney’s London visit, tangled itself up in news that Britain’s economy contracted by an estimated 0.7% in the second quarter, and cast a shadow over Cameron’s drive to attract foreign investment in the UK.

What did Romney think of the $21 trillion figure, given his own detailed understanding of the offshore economy?

Do we need to make further cuts in public expenditure, given how much money is stashed away, untaxed, offshore?

Do we need foreign investment all that much, given how rich our own investors are?

After all, if UK citizens own offshore funds proportionate to the size of the UK economy, then there is $714 billion sitting offshore, about £454 billion, that should be of interest to the tax authorities. Given that London is one of the capitals of offshore, and its banks are heavily involved in all kinds of commission-generating activity, this is likely to be a conservative figure. British companies are also well represented in mining, arms trading and other sectors not known for the stringent financial controls and high moral tone. And Britain provides a notably permissive environment for multinational companies, like News Corporation, to an extent that is difficult to square with any notion of the public interest.

CONTINUED w/LINKS...

http://thereturnofthepublic.wordpress.com/2012/07/27/keeping-offshore-invisible-a-study-in-news-management/

When treated like a forensic science, the economy isn't really boring at all.

[Zorra]

4. Rhetorical question, bro?

[Octafish]

11. Yes, Zorra-san. I hope to generate discussion as Corporate McPravda won't...

REPORT: Media Prioritize Animal Attacks, Tom Cruise Over Huge Bank Scandal

July 19, 2012 1:44 PM EDT ››› BEN DIMIERO & ROB SAVILLO

Instead of covering one of the largest banking scandals in history, American television news outlets have focused on the divorce of Tom Cruise and Katie Holmes, shark sightings, and a chimpanzee attack.

Last week, we documented how television news outlets are practically ignoring an emerging controversy over whether major financial institutions have been manipulating the LIBOR, a key interest rate banks use to borrow money from each other that is "used as a benchmark to set payments on about $800 trillion worth of financial instruments." MIT professor of finance Andrew Lo told CNN Money that the LIBOR-manipulation story "dwarfs by orders of magnitude any financial scams in the history of markets."

CONTINUED ...

http://mediamatters.org/mobile/blog/2012/07/19/report-media-prioritize-animal-attacks-tom-crui/187238

PS: Thanks for grokking, Hermano. Rhetorically, it is major.

[Zorra]

12. LIBOR-manipulation story dwarfs by orders of magnitude any financial scams in the history of markets

LIBOR-manipulation story dwarfs by orders of magnitude any financial scams in the history of markets

"Instead of covering one of the largest banking scandals in history, American television news outlets have focused on the divorce of Tom Cruise and Katie Holmes, shark sightings, and a chimpanzee attack."

Allen and Jim got it right:

“Whoever controls the media, the images, controls the culture.”
Allen Ginsberg

"Whoever controls the media, controls the mind."
Jim Morrison

I'm really glad you are still here, Octafish.

[Rex]

5. The Cayman Islands.

Any offshore account that is a tax shelter. It is like when the Pentagon LOST a trillion dollars...ooops our bad, thank you taxpayer for shouldering the burden.

THIS is why I laugh when people pretend we still live in a capitalist society. Maybe at one time we did, but not now.

[Octafish]

19. Corruption and the Offshore Interface

A good day will be when the Department of Justice enforces criminal conspiracy, particularly in regards to Wall Street and Washington interface of play-for-pay-for-play-for-pay Koch Brothers freaking Merry-go-round.

Not just bribery

The current tendency of the World Bank, TI, the OECD, and many people in the legal professions to restrict their definitions of corruption to the bribery of public officials must change. Corrupt practices involve much more than this, as the following four examples illustrate.

First, take an example from the dot-com boom of the late 1990s: at that time, Wall Street investment banks offered stock in "hot" initial public offerings to corporate executives who were in a position to direct their companies' business to their bank, while Wall St. banks' analysts curried favour with companies by writing absurdly upbeat assessments of companies to persuade them to direct their business (issuing fresh capital, or mergers & acquisitions) to the analysts' banks, which would earn large fees as a result.

A second example would be illegal market-rigging: private companies building up secret monopolistic positions by using tax havens to hide the identities of parties which, to the outsider, appear unrelated, but are in fact related and secretly colluding to fix prices.

A third illustration comes from the byzantine "Elf Affair", which involved, among many other things, African oil money being routed via tax havens to provide secret financing for French political parties.

A fourth case in point involves multiple exchange rates, for example in Zimbabwe or in Angola during the 1990s. Under multiple official exchange rates, well-connected people can get access to very cheap dollars, then round-trip them through another exchange rate, ending up with what is effectively free money from public coffers. The point is that under multiple exchange rates, this is entirely legal. This system is clearly corrupt.

CONTINUED w LINKS...

http://www.taxjustice.net/cms/front_content.php?idcat=100

Thanks, Rex! Never would've learned about this resource without your important post.

[freshwest]

6. Medical bills, home and auto repairs, mercenaries, drones, bombs, prostitutes, the usual.

All I know, was none of it made to my place. Maybe it's hiding under a table or chair, like Bush's WMD.

[KT2000]

7. A lot of the money was not there

to begin with. It was a house of cards. A single mortgage was resold several times in different formats. When the homeowner went underwater,the resold mortgage was like a flat tire on a semi. Then there were lots of flat tires and the semi could not move anymore. When their money disappeared, the financial firms needed to keep doing business and paying their clients.

The only winners were the financial firms that bet the house of cards would fail.

[econoclast]

8. There never were trillions in bailouts

Most of the hyped "16 trillion" or whatever the over-amped number in bailout money one reads is accounting gimmickry on the part of those writing the stories.

The lions share is generated via tricks like this A bank borrows a billion dollars overnight. Then they roll over that billion dollar loan every day for 60 days. What they really did was borrow 1 billion dollars and pay it back with interest 60 days later.

But some of the more hysterical reporting counts that as "gross borrowing" of 60 billion dollars.

So most of the "trillions of dollars" in bailouts are dollars that never really were.

You were INTENDED to be confused by the breathless reporting.

[Junkdrawer]

9. Largely, it was lent back to the Fed who paid more interest than we charged the banks....

A back door, razzle-dazzle way of refunding the banks with taxpayer dollars.

As for the rest, stay tuned. It will be the centerpiece of LIBORgate.

[econoclast]

10. Actually that razzle dazzle

Is used to fund the Federal deficit. Fed Buys or borrows existing treasuries or mortgage backed products from the banks and the banks use the new cash to buy current-issue Treasuries ... Funding the deficit at historically small interest rates.

[quaker bill]

13. It never existed

to a large extent the "money" was inflated asset values for paper that had literally nothing to back it up. Somebody somewhere noticed the emperor had no clothes. The "money" simply evaporated.

For a very brief moment my house probably had an inflated asset value a bit more than 3.5X what I paid for it. If I had sold it and sat on the cash for a bit, I would be sitting pretty at the moment. I didn't and now the house is worth only 1.5X what I paid for it, the rest simply evaporated, it was "value" that never truly existed. Had I sold it, the new mortage would have been securitized, packaged into a CDS, and all that fake "value" would simply have disappeared, just the same. The difference is that I would have had the cash.

People who sold assets into the bubble realized some of the fake gains. Folks who traded in fake assets realized most of the losses. The fake assets had a life of their own and became momentarily "worth" multiples of their faux value. The "money" disappeared because some folks noticed that it never really existed.

[TreasonousBastard]

14. It never existed. Basic macroeconomics explans it...

When you put $100 in the bank, it lends $80 of it. Since you can get your $100 back at any time, there is now effectively $180 in circulation and the money supply just got a little bigger. The system works because everybody doesn't withdraw their money from the bank at the same time. Withdrawals, deposits, cleared checks... all happen sporadically and there's always enough actual cash in the bank to cover them. The system can go on forever (we think).

Except when there isn't enough actual money in the bank to cover a run on it, like what happened in the 30's with bank failures, bank holidays, and other good times. That's when we find out that the whole system is based on... nothing. It used to be based on a few tons of on or so of gold, but there wasn't enough in the world to back monetary and economic growth so we threw that system out. Besides, there are better uses for gold than just having it sit in Fort Knox.

So, the "money" just vaporized. It's like you bought Facebook stock and look at the price now. You just lost a bundle of "money" that vaporized. That might hurt, but it's not serious unless you borrowed against it-- now you have a debt that didn't vaporize and you have to cover with the money that disappeared.

The system is straight out of Alice's looking glass, but it's the best we've come up with yet, and with all the problems it's still the one that allows you to buy a car, an iPad, and a house. Without it we'd have little or no capital to build the stuff to get us out of tents and woodstoves.

[quaker bill]

16. What is really cool

is when you begin to grasp that the "money" they replaced it with is only slightly less fake and that is only because people believe in it.

In short they took "money" people stopped believing in, and replaced it with "money" people believe in. All money is fiction, but the fiction we believe has greater value than the fiction we don't.

Read up on the Brazilian Real and you will get what I am saying. In short, at the request of the government, some MIT guys created a fictional stable currency for Brazil, then once people got used to believing in Reals as a stable currency, they printed it and took the old money out of circulation. Inflation completely went away because people suddenly believed their money had stable value.