A new report from Bloomberg Markets magazine reveals details about the super secret emergency loans the Federal Reserve administered to rescuing the nation’s largest banks. 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.
While that number might seen alarming, the Fed actually did its part in keeping the banking system afloat during the financial crisis.
Felix Salmon at Reuters points this out.
“On September 16, 2008, Morgan Stanley owed $21.5 billion to the Fed. The next day, that number doubled, to $40.5 billion. And eight working days later, on the 29th, the bank’s total borrowings from the Fed reached $107 billion. The Fed didn’t blink: it kept on lending, as much as it could, to any bank which needed the money, because, in a crisis, that’s its job.”
But the really scandalous part in the Fed’s emergency loans to the banks is the fact that the information was disclosed so late.
It would have no doubt been extremely useful during drafting the financial regulations.
Because lawmakers were kept in the dark about the details of the Fed’s emergency loans to the banks, they arguably didn’t have all of the information necessary to write the Dodd-Frank Wall Street Reform and Consumer Protection Act.