Thursday, April 14, 2011

Fed gives $220M to 2 Wall Street housewives

Since Congress forced the Federal Reserve to open its books for the first time ever, the result is -- you probably guessed -- not pretty.

The peerless Rolling Stone reporter Matt Taibbi reports the Fed
...sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. "Our jaws are literally dropping as we're reading this," says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. "Every one of these transactions is outrageous."
Here's where the housewives come in: The Fed loaned $220 million in taxpayer money to a company called Waterfall TALF Opportunity. Two of Waterfall TALF Opportunity's chief investors are Wall Street housewives who have no serious business experience. One is Christy Mack, wife of Morgan Stanley Chairman John Mack. The other is Susan Karches, widow of the president of Morgan Stanley's investment-banking division.

Taibbi aptly calls it "giving already stinking rich people gobs of money for no fucking reason at all."

The ladies set up the company after the Fed started giving handouts to millionaires. They invested $14.87 million in the company in June 2009. The Fed (us) loaned them $220 million, which they used to buy commercial mortgages. If the investments succeeded, they'd get 100 percent of the profit. If they failed, the Fed absorbed 90 percent of the losses.

Fed Chairman Ben Bernanki isn't answering questions about the deal.

As of last fall, Waterfall TALF still owed the government (us) $150 million.