Watchman Newsletter

Fed data reveal wide scope of loan action during financial crisis

The Washington Post (Link) - Neil Irwin & Jia Lynn Yang (December 1, 2010)

The Federal Reserve pumped trillions of dollars into all manner of banks, investment firms and major companies during the financial crisis, according to documents released Wednesday that reveal for the first time the full scope of the Fed�s emergency lending.

The Fed was compelled by recent Wall Street reform legislation to release details of the special lending programs it undertook in 2008 and 2009, when it deployed a wide range of untested tools to try to fight the financial crisis. The programs included more than 21,000 individual transactions with a total loan value that Bloomberg News tabulates at $3.3 trillion. The programs involved have since been shut down, and most loans have been repaid.

The Fed said it does not anticipate incurring any losses; indeed, many of the programs have turned a profit for shareholders.

The data show that major banks were heavily dependent on the Fed programs for funding during the darkest days of the financial crisis but also that a wide range of America�s businesses turned to the Fed for funding at times.

A program to support the market for corporate lending known as commercial paper benefited not only top U.S. financial institutions such as Bank of America and Citigroup, but also was used by iconic American companies such as General Electric and Harley-Davidson.

That and other programs were also used extensively by the U.S. affiliates of foreign firms-including one owned by the South Korean government. The Korean Development Bank used the Fed�s commercial paper facility to the tune of billions of dollars, including a $407 million short-term loan on a single day. Many foreign banks, including the Swiss UBS and the German Deutsche Bank took extensive advantage of various programs.

The disclosures are already drawing a new round of criticism for the Fed.

�After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed�s multitrillion-dollar bailout of Wall Street and corporate America,� said Sen. Bernie Sanders (I-Vt.), a longtime Fed critic who pushed for the new disclosures, in a statement. �Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.� �

America ~ Economic Crisis ~ Europe ~ Kings of the East