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U.S. Federal Reserve Makes Public Lending Data During Financial Crisis

Source: WSJ

Posted on 01 Dec 2010

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Earlier today the U.S. Federal Reserve disclosed details of loans made to financial firms, companies and foreign central banks during the financial crisis.

The Federal Reserve in posting this information on its website was complying with the Dodd-Frank financial regulation law passed in July which, among its objectives, aims to boost transparency at the U.S. central bank. Fed officials said it is the biggest release of crisis lending data that a central bank has ever done.

The data cover all the Fed's emergency lending programs during the crisis except for detailing which banks borrowed from the central bank's discount window. The files give information on more than 21,000 transactions from December 2007 to July 2010.

The Fed said it has made no credit losses on the programs that have been wound down thanks to better financial conditions, and that it doesn't expect losses on the few remaining ones.

In December 2007, the Fed started a series of unprecedented programs aimed at fighting the credit crunch as signs grew of severe distress in global financial markets. The central bank first created the Term Auction Facility, which allowed banks to bid for loans without the stigma associated with the Fed's discount window, the traditional way to obtain overnight emergency loans.

A few months later, when financial markets deteriorated after the collapse of Bear Stearns Cos., the Fed created the Primary Dealer Credit Facility, which provided discount window loans to investment banks, a privilege previously reserved for more tightly regulated commercial banks.
In addition to providing banks overnight loans, the Fed, through its Term Securities Lending Facility, agreed to lend up to $200 billion in Treasury securities to investment banks for longer, 28-day periods.

To help money-market mutual funds during the crisis, the Fed launched the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. The Fed also created the Money Market Investor Funding Facility to aid money market investors.

In October 2008, the Fed created the Commercial Paper Funding Facility to help companies who had trouble obtaining short-term loans called commercial paper.

Major corporations use the loans to fund their day-to-day operations, yet the commercial paper market was under considerable strain, making it hard for certain companies to function amid growing financial market turmoil. A range of companies such as American Express Co., General Electric Co., Ford Motor Co. and Harley-Davidson Inc. had expressed interest in the facility. The Fed stopped making loans under this program in February.

Details provided on the website include the borrower's name, the amount borrowed, the date the credit was extended, the interest rate charged, information about collateral and other relevant credit terms. Similar information is given for Fed loans to foreign central banks via the dollar liquidity swap lines.

Bernie Sanders (Ind., Vt.), the U.S. senator who sponsored the amendment to Dodd-Frank forcing the disclosures, said ahead of the release he'd bescanning the Fed website for evidence there were conflicts of interest in the emergency lending the central bank did during the crisis.

Thanks to the Ms. Sanders, who has been leading the fight to make the Fed more transparent, the Government Accountability Office will conduct an audit of the Fed's emergency actions going back to the start of the crisis in 2007.