Crisis-walloped banks aided with federal loans likely made a fortune by lending the same money back to the federal government at substantially higher interest rates, a new report indicates. The study by the Congressional Research Service supports complaints that the largest banks essentially engaged in taxpayer-financed arbitrage by cashing in on loans to Uncle Sam using money obtained almost for free from ... Uncle Sam. At the same time, American businesses were dying and homeowners were going under because bank loans or federal aid weren't available to them.
More than $3 trillion was loaned to banks at extremely favorable terms, and there were no conditions on how the money was to be used. Some 30 different times nine firms were able to borrow up to $6.2 billion in government securities for four-week intervals, paying single fees of .0078%, reports the Huffington Post. Bank of America borrowed more than $48 billion at rates between .25% to .50% in a single three-month period. "Why wasn't the Fed providing these same sweetheart deals to the American people?" asked a spokesman for Vermont Sen. Bernie Sanders, who obtained the report. "The Fed was practicing socialism for the rich, powerful, and the connected, while the federal government was promoting rugged individualism to everyone else." A Bank of America executive said the institution provided "vital support to the economy throughout the financial crisis." (More economic crisis stories.)
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