While most people know about Congress’ $700 billion TARP program, the Fed’s secret emergency loans to banks during the financial crisis remains shrouded in mystery..
A new Bloomberg Markets report shines more light on this lending.
After adding up all the guarantees and loans, the Fed committed $7.77 trillion to rescuing the financial system as of March 2009, the report said.
Notably, while the banks were taking these huge loans, they maintained that they were fine
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Federal Reserve Chairman Ben Bernanke’s excuse for all the secrecy was that revealing the details of those who borrowed money from the Fed would possibly make needy banks reluctant to borrow in the future and investors wary of investing in those institutions.