What Big Data Has Helped Us Learn About Wall Street

Author: Linda Rosencrance
Spotfire Blogging Team

So I bet you thought you knew just how big the federal government’s 2008 bailout of the American and European banking industries was—$500 billion, right?

But guess what? It was bigger—much bigger. In fact, it really was $1.2 trillion, yep, that’s trillion, as of December 5, 2008, when America was on the verge of a total economic collapse, according to this article in the American Thinker.

But now the truth is finally out thanks to Big Data and some real digging by Bloomberg News.

 Bloomberg estimates that the $ 1.2 trillion is how much cash liquidity the Federal Reserve Board and the U.S. Treasury gave Wall Street in low-interest, collateralized loans. However, it seems the American people were never supposed to know about it.

The Bloomberg report is also chock full of other useful information. However, that information was extremely hard to come by. Even though the U.S. Congress mandated that the government release some of the data, Bloomberg had to file Freedom of Information Act requests, followed by litigation to get the information on most of the secret loans.

The big data dump took place in July. Bloomberg’s data analysts then “compiled, combined and analyzed” the data to reach its conclusions and create the spread sheets contained in its report.

Here’s some of what Big Data and Bloomberg discovered as summarized in the American Thinker article.

• In the fall of 2008, after the private lending markets had shut down, there were six different U.S. government programs to keep the private credit markets afloat with taxpayer money.
• While the feds were telling us that the 10 largest financial institutions had borrowed about $160 billion from the U.S. Treasury Department, they seemed to forget to tell us that those same companies were also borrowing $669 billion in emergency funds from the U.S. Federal Reserve. The data revealed that Morgan Stanley borrowed $107 billion from the Fed, Citicorp borrowed $99.5 billion and Bank of America got $91.4 billion.
• Almost half of the Fed’s top 30 borrowers were not American but rather European companies including Royal Bank of Scotland ($84.5 billion) and UBS AG ($77.2 billion).
• Several big American financial institutions relied on secret borrowing from the Fed to avoid insolvency. In some cases, an institution’s entire stash of available cash came from the Fed.
• A few institutions required emergency federal loans to stay liquid well into 2010.

One of the conclusions, the American Thinker drew from Bloomberg’s report was that “essentially nothing has been done to correct or eliminate the conditions which would allow a reoccurrence of the Crash of  ’08.”

That does not seem to bode well for the future of the economy. However, Big Data may offer some hope.

“As long as companies and governments understand the power of big data to deliver higher productivity and consumer surplus and the next wave of growth in the global economy, there should be strong enough incentive to act robustly to overcome [the] barriers to its use,” according to analysts from McKinsey Global Institute (MGI) and McKinsey & Company’s Business Technology Office.

And doing that will help companies be more competitive, enable the public sector to operate more efficiently and deliver better services even in trying economic times as well as inject new productivity into firms as well as entire economies, they said.

They concluded, “Big Data is a big deal.”