Reports the Financial Times:
Foreign banks were amongst the biggest users of the US Federal Reserve’s emergency credit programmes during the financial crisis of 2007-2009, according to data released by the US central bank.
The revelation that foreign-owned banks were some of the biggest beneficiaries may anger both critics who saw the Fed’s efforts to support US credit markets as a bail-out for Wall Street and those who believed the rescue should benefit the American taxpayer.Sewell Chan at The New York Times reports that the Fed helped out corporations, not just banks, with short-term iou's called commercial paper. Companies that received help included Caterpillar, General Electric, Harley Davidson, McDonald’s, Verizon and Toyota.
The Fed created a number of emergency loan programs to ease the financial crisis. One program was called the "Primary Dealer Credit Facility." Reports Chan:
Citigroup was the greatest beneficiary of that program, drawing on a total of $1.8 trillion in loans, followed by Merrill Lynch, which used $1.5 trillion; Morgan Stanley, which drew $1.4 trillion; and Bear Stearns, which used $960 billion. During the crisis, Merrill Lynch was sold to Bank of America and Bear Stearns was sold to JPMorgan Chase, as storied Wall Street institutions crumbled under the weight of bad loans and excessive leverage.
The data also revealed the global scope of the crisis that followed the collapse of Lehman Brothers in September 2008. The European Central Bank drew heavily on the Fed’s currency swap lines to support dollar-financed money markets in Europe. But nine other central banks, the data show, also made use of the swap lines: Australia, Britain, Denmark, Japan, Mexico, Norway, South Korea, Sweden and Switzerland.More to come.