Of bailouts and liquidity shakedowns

Please chip in to support more articles like this. Support rabble.ca for as little as $5 per month!

Here is an amazing multimedia article published by Bloomberg Markets Magazine in the U.S., that lists all of the individual banks which received financial assistance from the U.S. Federal Reserve during the 2008-09 crisis. It shows each bank's peak borrowing from the Fed, the number of days they held the funds, and the timeline for paying it back. You can sort the banks by name, amount borrowed, and other criteria.

How did Bloomberg get this? From a big freedom of information request, which they then assigned dozens of researchers to compile and analyze. Fascinating stuff...

The Big Five Canadian banks are all on Bloomberg's list. Together they borrowed (at peak) $28 billion from the U.S. Fed, holding funds for as long as two years. Scotiabank was the biggest Canadian borrower from the U.S. lender of last resort, holding $9.5 billion (U.S.) as of December 2008 -- and its Fed borrowings were worth almost half of the bank's market value at one point!

CBC Radio's Mike Horbrook reported on this Bloomberg feature this morning, and interviewed me among other commentators on the silly old question: "Were our banks bailed out?" Does a hedge fund executive drink fine wine?

The $28 billion in assistance from the U.S. Fed received by our big banks pales in comparison, of course, to the line of credit worth up to $200 billion that was provided by our own federal agencies (including the Bank of Canada and CMHC) through Jim Flaherty's Extraordinary Financing Framework. I would love to see similar details (as in the Bloomberg report) on the banks' use of these Canadian funding sources during the same period.

Nevertheless, the bankers have the gall to deny that this was not a "bailout," but rather constituted normal liquidity smoothing interventions by the central bank. This is historically false, and morally offensive to the taxpayers of Canada who were on the hook if this emergency assistance proved to be insufficient to stabilize the banks. The reality is that our governments (and the U.S. government, too, we now know) provided enormous sums of finance to the Big Five banks, at virtually zero interest, at a moment in time when commercial funding was unavailable. Canadian banks, like any other leveraged private banking institution (lending out their capital 20 times over or more), faced a real risk of collapse if the crisis of confidence worsened. Having a $200 billion line of credit in your pocket, sure helps people have confidence in your future. And confidence is a leveraged bank's main asset. So the banks were absolutely stabilized, and possibly saved, by these extraordinary government interventions. Whether you call that a bailout or a "liquidity injection" is all in the semantics.

In response to that bailout, the banks owe the state and its taxpayers an enormous debt of gratitude. They should also be more co-operative when it comes to the taxes and regulations that would help to prevent this kind of crisis from arising again in the future. At a bare minimum, they should lose the arrogance which characterizes their self-righteous, whiny denials that they ever had to turn to the nanny state for their own survival.

As I told Mike Horbrook in my interview with him, if Tony Soprano shakes you down, he might call it a "liquidity injection" -- but it's still a shakedown!

This article was first posted on The Progressive Economics Forum.

Related Items

Thank you for reading this story…

More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.

rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.

So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.

And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.


We welcome your comments! rabble.ca embraces a pro-human rights, pro-feminist, anti-racist, queer-positive, anti-imperialist and pro-labour stance, and encourages discussions which develop progressive thought. Our full comment policy can be found here. Learn more about Disqus on rabble.ca and your privacy here. Please keep in mind:


  • Tell the truth and avoid rumours.
  • Add context and background.
  • Report typos and logical fallacies.
  • Be respectful.
  • Respect copyright - link to articles.
  • Stay focused. Bring in-depth commentary to our discussion forum, babble.


  • Use oppressive/offensive language.
  • Libel or defame.
  • Bully or troll.
  • Post spam.
  • Engage trolls. Flag suspect activity instead.