Originally Posted by sallylou
Jazzberry, the Fed brought the toxic/worthless mortgage backed securities from the banks/brokerage firm (they are one and the same under deregulation). The fed gave the banks far more money than the investments were worth. That meant that the shareholders did not take a loss. The taxpayers are the ones who will pay for that loss.
It's also confusing because the Federal Reserve is not federal. It is a bureaucracy run by an appointed Board of Governors (read: bankers). So U.S. gov't gives money to the Fed to give money to banks in exchange for worthless paper. Isn't that confusing? Now, the Fed holds the toxic paper and it is on their balance sheet. The government does not want this to be transparent (easy to understand).
Basically, a corporate entity sold shit to a privately run bureaucracy who received money from the federal government. In other words, you tax money went to corporations that made bad investments so that the CEOs and shareholders lost nothing or very little. Now, taxpayers have to make up for this loss by paying more taxes and giving up services.
Sallylou, thanks for the explanantion. Its very depressing.
So it seems that for the larger banks if they make money, they keep it. If they loose money, the taxpayers takes the loss. There should be a way to make this illegal.