Congressional Research Service Report: Banks got ‘direct corporate welfare.’

The move yielded an easy profit for the banks, since the Fed was charging almost nothing to borrow and Treasuries were paying at least decent yields. Nothing illegal about the move, except that the easy Fed money was supposed to juice the economy.


Now a new study made at the request of Sen. Bernie Sanders of Maine details how prevalent this practice was See Congressional Research Service report (PDF) .
 
For instance early 2009, J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm JPM +0.09% had an average of $29.2 billion in outstanding Fed loans with a 0.3% interest rate and held $34.6 billion in U.S. government securities, with an average yield of 2.1%.


In late 2008, Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c C -0.22% received $15.8 billion in Fed loans through the Fed’s Primary Dealer Credit Facility with a 1.2% interest rate; $11.6 billion in Term Auction Facility loans with a 1.1% interest rate; and $4.9 billion in Commercial Paper Funding Facility loans with a 2.7% interest rate. It simultaneously held $24 billion in U.S. government securities with an average yield of 3.1%.

Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac BAC +0.33% : More than $11 billion in government securities with $47.1 billion in Fed loans in mid-2009.

In each case, the banks parked the money and took the easy profit rather than lending to businesses and consumers. Sanders calls it “direct corporate welfare” and blames the Fed for not putting adequate strings on the loans.

Read on.