Finally the Fed Admits to a Foreign Bank Bailout with TARP

The initial story was that the Fed via its Foreign Exchange liquidity swap lines had only bailed out foreign Central Banks, which in turn took the money and funded their own banks. 

It turns out that is only half the story: we now know the Fed also acted in a secondary bail out capacity, providing over $350 billion in short term funding exclusively to 35 foreign banks, of which the biggest beneficiaries were UBS, Dexia and BNP. See the chart above - click to expand.

Since the funding provided was in the form of ultra-short maturity commercial paper it was essentially equivalent to cash funding. In other words, between October 27, 2008 and August 6, 2009, the Fed spent $350 billion in taxpayer funds to save 35 foreign banks. 

And here people are wondering if the Fed will ever allow stocks to drop: it is now more than obvious that with all banks leveraging their equity exposure to the point where a market decline would likely start a Lehman-type domino, there is no way that the powers that be will allow stocks to drop ever... 

Until such time that nature reasserts itself, the market collapses without the Plunge Protection Team being able to catch it, and the Fed is finally wiped out in one way or another.

Analysis by Tyler Durden

http://www.zerohedge.com/article/meet-35-foreign-banks-got-bailed-out-fed

Europe Debt - How A European Bailout Package Works

Using the Irish Bailout Package as an example...

It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.

On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. 

The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local “Lady of services” drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit. The “Lady of services” then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveler will not suspect anything. 

At that moment the traveler comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

And that, Ladies and Gentlemen, is how a bailout package works.  Likely originator: IAN FRIZZEL

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And for a true discussion of the "magic" involved:

And me? I live in Slovakia!