Fed Giving Out Secret Loans (Surprise?), The Finanacial Threat to the ECB, and House of Representatives Taking Advantage of Insider Trading?

Whoa, score of financial news today after a relatively uneventful day yesterday.  First up is Bloomberg reporting on the disclosure that the Fed made many low interest loans to banks during the financial crisis:

Credit Suisse Group AG (CS), Goldman Sachs Group Inc. (GS) and Royal Bank of Scotland Group Plc (RBS) each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.
The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.
Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.

*Yawn*  Is anyone really surprised?  HBO's Too Big To Fail which is based on the popular novel that depicts the events of the financial crisis has just been released and Jesse Eisinger has an interesting review:

The movie is set up in the Hollywood conventional way: A gang of misfits, each with a special expertise, is brought together for an impossible mission. There's Treasury Secretary Henry Paulson, steely eyed at the moment of truth. There's New York Federal Reserve head Timothy Geithner, the athlete (he doesn't just jog, but also plays what appears to be squash). And then there's Federal Reserve chairman Ben Bernanke, the professor with a heart of gold and secret knowledge of the Great Depression.

Ostensibly it's a story of their success against all odds. Michael Kinsley, reviewing the movie in the New York Times, labeled Hank Paulson [1] the "hero" of the account.
Except that the movie actually depicts something entirely different: failure upon failure. "Too Big To Fail" The Movie isn't the story of how the Three Musketeers saved the global economy. It's a story of how the three didn't see the financial crisis coming; hadn't prepared for it; made mistake after mistake as it was cresting; and then, in their moment of triumph, made their most colossal blunder of all.
That, it turns out (whether or not "Too Big To Fail" knows it), is the true story of the financial crisis.

Wow, I really gotta see this. I thought for sure it would put Ben-Newsweek Person of the Year 2009-Bernanke and the rest on a pedestal for "saving" the world economy.  Maybe they will make a movie about the Euro Crisis someday.

Another day, another person coming out and saying what the market already knows: Greece defaulting is an inevitability at this point.  This time it's a former ECB economist:

Former ECB Chief Economist Otmar Issing said Greece will probably be unable to meet its obligations as the euro region’s most indebted nation is “insolvent.” While it is “not physically impossible” for Greece to honor its obligations, repayment is unlikely, he said today at a press conference hosted by Nykredit A/S in Copenhagen.
“I’m skeptical about Greece,” said Issing, who joined the ECB a year before the euro’s inception in 1999 and stayed there until 2006. “Greece is not just illiquid, it’s insolvent.”

And of course ECB Prez. Jean-Claude Trichet will continue to deny it, but maybe he should be looking at his own finances.  From Spiegel:

While Europe is preoccupied with a possible restructuring of Greece's debt, huge risks lurk elsewhere -- in the balance sheet of the European Central Bank. The guardian of the single currency has taken on billions of euros worth of risky securities as collateral for loans to shore up the banks of struggling nations.

Looks like the making of another movie to me.

Let's take it back to America now and see what our dear public servants in Congress have been up to:

It’s no secret that members of Congress qualify as political insiders, but a new report strongly suggests that they also may be insiders when it comes to trading stocks.An extensive study released Wednesday in the journal Business and Politics found that the investments of members of the House of Representatives outperformed those of the average investor by 55 basis points per month, or 6 percent annually, suggesting that lawmakers are taking advantage of inside information to fatten their stock portfolios.
“We find strong evidence that members of the House have some type of non-public information which they use for personal gain,” according to four academics who authored the study, “Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives.”

Now, I don't think insider trading should be considered a crime (see Murphy and Tamny) but this shouldn't come as a surprise either.  I mean, Congressmen would be complete and utter morons to not use their position to get ahead in the market.  The irony comes in because, while it isn't proven, Congressmen can use insider information while the overall public can't.  It's well past time to legalize insider trading.  At least Congressmen aren't giving out political positions to their spouses though....oh wait:

U.S. Rep. Barney Frank admitted he helped his ex-lover land a lucrative post with Fannie Mae in the early 1990s while the Newton Democrat was on a committee that regulated the lending giant — but he called questions of a potential ethical conflict “nonsense.”

At least Frank isn't arrogant enough to use the "everyone is doing it" excuse....

“If it is (a conflict of interest), then much of Washington is involved (in conflicts),” Frank told the Herald last night. “It is a common thing in Washington for members of Congress to have spouses work for the federal government. There is no rule against it at all.”

You have to be kidding me, after royally screwing up on recognizing the financial crisis and telling the public that Fannie and Freddie were in great condition months before September 2008, this guy waddles out and claims "well just because other Congressmen give positions to their spouses, why shouldn't I?"  He deserved this and much more from Bill O'Reilly:

Dennis Miller's best joke by far went along the lines of:  When Frank's boyfriend was running a prostitution ring out of their apartment (true story) the code words for dominant and submissive were Fannie Mae and Freddie Mac.  And yet this guy keeps getting elected.

In another awesome display of Congressional irresponsibility, the Senate has voted not to approve neither Obama's budget, Paul Ryan's budget, Pat Toomey's budget, or Rand Paul's budget:

The U.S. Senate rejected a House- passed budget plan that would privatize Medicare, a vote aimed at putting Republicans on record on an issue Democrats say could boost them in the 2012 elections.
The Democratic-controlled Senate voted, 57-40, not to advance the plan drafted by House Budget Committee Chairman Paul Ryan, a Wisconsin Republican.

At the insistence of Republican Senate leaders, the chamber also voted on President Barack Obama’s fiscal 2012 proposal announced in February. Senators voted, 97-0, not to advance the president’s plan, which would cut $1 trillion from budget deficits and is silent on broad changes to Medicare and other entitlement programs.
The Senate also rejected, 55-42, a plan offered by Senator Pat Toomey, a Pennsylvania Republican, that included many of Ryan’s ideas while omitting the Medicare proposal. The Senate turned back, 90-7, a proposal by Senator Rand Paul, a Kentucky Republican, to eliminates scores of programs and balance the budget in five years.

Can't be surprised at this either.  Meanwhile, Bill Gross has stopped being so candid about PIMCO's treasury holdings:

“We're not overweight Treasuries. We're certainly underweight Treasuries, but that does not mean we don't own lots of other bonds...It does not mean as well that we're not a little bit shy in terms of duration." 

"We’re having a good year...so don't cry for Pimco."

On the conspiracy theory front, are you still wondering why we got involved with Libya and not Yemen or Syria?  Here is a hint, it rhymes with Holdman Cracks:

May 26 (Reuters) - Goldman Sachs (GS.N) and HSBC (HSBA.L) together held $335 million of the Libyan oil fund's assets, while Societe Generale (SOGN.PA) held $1 billion in structured products for the fund, Global Witness said on Thursday.

Say, didn't those crazy guys over at Zerohedge predict this all along?