Wall Street Aristocracy Got $1.2 Trillion From Fed -- Bloomberg

[Munger]

Article shines a bright light on the reality that bank and investment bank executives have no qualms about lying to their investors -- the lack of leadership and integrity is highly concerning given the current stresses.  A culture of ignorance and corruption still runs throughout Wall Street.  My guess is that the problem is even greater in Europe.  Another lesson here is that many who rose to the top of these banks and investment banks over the past 20 years are not smart people -- seems their greatest talents were 1) the ability and willingness to lie and 2) the eagerness to take enormous and dumb risk without any consideration of the potential adverse consequences.

 

The Fed fulfilled its responsibility to provide liquidity during periods of stress but the lies by the banks and investment banks about the "strength" of their balance sheets is stunning.  Trust current proclamations of bank soundness with great caution.

 

From Bloomberg

Two weeks after Lehman’s bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had “strong capital and liquidity positions.” The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley’s Fed loans.

 

That was the same day as the firm’s $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley’s available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company’s total profits over the past decade, data compiled by Bloomberg show.

 

JPMorgan Chase & Co. (JPM), the New York-based lender that touted its “fortress balance sheet” at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank’s 97-year-old primary lending program to help banks in a cash squeeze.

 

 

Linke to full article -- http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html