New data shows foreign banks biggest recipients of Fed money
The Federal Reserved released documents Wednesday identifying the recipients of $3.3 trillion in emergency aid provided at the height of the financial crisis.
“Two European megabanks — Deutsche Bank and Credit Suisse — were the largest beneficiaries of the Fed’s purchase of mortgage-backed securities,” The Huffington Post‘s Shahien Nasiripour reported.
More than $290 billion worth of mortgage securities were sold to Deutsche Bank, a German lender. Credit Suisse, a Swiss bank, got more than $287 billion in mortgage bonds.
“The mortgage purchase program has come under withering criticism by economists and financial experts who believe the Fed’s initiative has unnecessarily inflated the housing market, and prevented the cleansing that pretty much all experts believe is necessary for a full economic rebound,” Nasiripour wrote.
“In addition, the Fed disclosed details of ‘swap’ arrangements with foreign central banks,” the Associated Press reported. “These occurred when the Fed traded much-in-demand dollars for foreign currencies to try to ease credit. The foreign central banks, in turn, lent the dollars to banks in their countries that needed dollar funding. The Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan were involved in the exchanges.”
Banks weren’t the only recipients of Fed money. Corporations like Caterpillar, General Electric, Harley Davidson, McDonald’s, Verizon and Toyota also relied the programs.
In 2008, as commercial loans dried up, the Fed became the only source of loans for otherwise creditworthy corporate borrowers.
The data, which took months to compile and had previously been secret, was released Wednesday to comply with July’s Dodd-Frank law overhauling financial regulation.
“The information spans six loan programs as well as currency swaps with other central banks, purchases of mortgage-backed securities and the rescues of Bear Stearns Cos. and American International Group Inc,” Bloomberg noted.
“We see this not as the end of a process but really a significant step forward in opening the veil of secrecy that exists in one of the most powerful agencies in government,” Sen. Bernie Sanders (I-VT) told reporters on Nov. 17.
“The act requires the Fed, after a two-year delay, to identify firms that, following the law’s passage, borrow through its discount window and participate in its purchases or sales of assets such as mortgage-backed securities and Treasuries,” Bloomberg observed.