MITT AND THE FOREIGN MEGABANKS

Perhaps the most offensive US government bailouts during 2008-2009 were the billions and billions spent keeping foreign megabanks afloat. The foreign megabanks benefited from two major government bank welfare programs that collectively dwarf any prior government spending program with the possible exception of World War II ($3.9 trillion in 2008 dollars): i) secret Fed loans ultimately uncovered by Bloomberg pursuant to a FOIA lawsuit; and, ii) the huge bailout of AIG which then turned around and paid 100 cents on the dollar to counterparties around the world on the infamous AIG credit default swaps.

Let's start with the secret emergency loans. In late 2008 and early 2009 the Fed (backed by the US taxpayer) lent a total of $16 trillion to save the global financial sector pursuant to seven publicly-announced programs. Until Bloomberg sued under FOIA, the identity of the borrowers under these programs was a closely guarded Fed secret. According to Bloomberg: "Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS, which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees." Without these loans, which peaked on December 5, 2008 at $1.2 trillion, the entire global economy likely would have collapsed. These amounts boggle the mind. With virtually zero democratic negotiation (no congressional vote, no election outcome, etc.) the Fed rescued the entire European financial sector, through trillions in outlays. Outrageous!

Next, the government paid billions more than necessary, much of it to foreign banks, when it jumped in and rescued AIG. None of the beneficiaries of that bailout bargained for a US government guarantee on the obligations that AIG owed--yet, the government made good on all of AIG's commitments. So, counterparties to AIG enjoyed a government guarantee for free. In all, foreign megabanks took in at least $50 billion in taxpayer supplied funds (according to this spreadsheet compiled by the Guardian) courtesy of the Federal Reserve.

So, next time, and there will be a next time, would a President Romney put a stop to US funded bailouts of foreign banks? I highly doubt it.

First, take another look at the OpenSecrets data on his top supporters: Credit Suisse gave $427,560; Barclay's gave $349,400; and UBS gave $259,200. These firms do not just give money away. And a President Romney simply would not have any incentive for turning on such major donors. To the contrary, he would need these kind of massive donations to fund his re-election campaign.

Second, Romney has sought out this source of donors; indeed, the global megabanks are his base. For example, he hosted a fundraiser just last month in London. Tickets to the fundraiser cost up to $75,000 a plate. According to the Washington Post, attendees included the CEO of Credit Suisse, a managing director of London-Based HSBC, a lobbyist for Barclay's, and a managing director from Deutsche Bank.

Finally, consider Romney's relationship with Barclay's, the London-based megabank. Barclay's received $8.5 billion in taxpayer funds as part of the AIG bailout. In 2011, Barclay's paid Romney a $50,000 speaker's fee. According to the London Telegraph, Barclay's raised so much money for Romney ($1 million) that members of Parliament signed a motion demanding that Barclay's stop spending so much on supporting Romney and instead focus on resolving the bank's troubles related to rigging Libor.

It is simply inconceivable that Romney would ever stop any bailout of banks, foreign or otherwise.