CT Blue

There is no criminal enterprise more organized than the modern banking industry. Wait, that may be unfair. It’s not really criminal if the government legalizes it once you start doing it. Still, if anyone else was doing it…

This is somewhat old news, but worth passing on, as reported by Pam Martens at Wall Street on Parade. It seems Elizabeth Warren was a bit upset about the fact that the too big to fail banks are feeding at yet another government trough, pushing the intended beneficiaries aside in the process:

Warren reminded the federal regulator that “Congress established the Federal Home Loan Bank System to serve as a reliable source of funding to local banks and other community lenders that offer families home mortgages.” Warren cited a report from the Consumer Financial Protection Bureau showing that significant levels of student debt pose a barrier to Americans trying to buy their first homes.

With housing stalling and mortgage credit still tight for many borrowers, Wall Street On Parade decided to delve into the financial filings of each of the 12 Federal Home Loan Banks and see who else might be getting a windfall from a program set up to help local lenders compete with the big boys. According to the Federal Home Loan Bank of Boston, the system’s mission is as follows: “By supporting community-based financial institutions, the Federal Home Loan Bank System helps to strengthen communities. The System directly benefits consumers by helping to ensure competition in the housing-finance market.” Got that – competition.

The mission, like so much else that Wall Street touches, seems to have run off the tracks. As of June 30, 2013, three of the giant, global, Wall Street banks are the largest borrowers from the Federal Home Loan Banks, with JPMorgan way out in front with borrowings of $61.840 billion. And it’s not borrowing from just one FHLBank, it’s borrowing from three and grabbing 65.8 percent of all advances from the FHLBank of Cincinnati, which services Kentucky, Ohio, and Tennessee.

Bank of America Corporation comes in second with borrowings of $33.844 billion. Citigroup, parent of Citibank, is next with $25.702 billion. These 3 banks, out of 7500 members of the Federal Home Loan Banks, already control over $2.539 trillion in domestic deposits in their FDIC insured subsidiaries – a whopping 41 percent of all U.S. domestic deposits. Because they are considered too-big-to-fail, they already receive a huge, lower-cost borrowing advantage over community banks and credit unions. With all those deposits, why do they need to go to the well of the FHLBanks?

(via Wall Street on Parade)

So, these banks borrow from us taxpayers at near to 0% and then, in the case of yet another big bank (Sallie Mae) turn around and lend it back to us taxpayers in the form of student loans at 25 to 40 times that rate. Nice.

These are the same banks, by the way, that are working hard to destroy the type of banks the Home Loan Bank System is supposed to be helping.