WASHINGTON (AP) — For the first time in its 98-year history, the Federal Reserve on Thursday identified banks that borrowed from its oldest lending program, naming those that drew emergency loans during the financial crisis.
The central bank lent up to $110 billion through its emergency “discount window” at the height of the crisis. At the time, banks were turning to the Fed as a lender of last resort because their credit had frozen up. The Fed argued then that naming banks that used its discount window could cause a run on them, endangering the institutions and defeating the program’s purpose.
The documents released Thursday provided details about which banks borrowed from the program from August 2007 through March 2010. Big U.S. banks, such as Wachovia and Morgan Stanley, took out short-term loans of $6 billion and $1.25 billion, respectively, in the fall of 2008, the documents showed.
Some of the largest foreign banks used the program, too. Barclay’s borrowed $1 billion.
Washington Mutual Bank took out $10 billion worth of short-term, mostly overnight, loans in the week leading to its failure. Its collapse was the biggest for a bank in U.S. history.
One day before it failed, Washington Mutual took out a $2 billion overnight loan, the documents show. The day it failed, Sept. 25, 2008, Washington Mutual took out another one-day $2 billion loan. JPMorgan Chase ended up buying the bank.
Few loans are being made now because most banks are in much better health. And both the financial industry and the economy have strengthened.
Bloomberg L.P. had sued the Fed, seeking details about the Fed’s discount window lending as well as other Fed loans made during the crisis. A similar lawsuit was later filed by News Corp.’s Fox News Network LLC. Other news organizations, including The Associated Press, filed legal briefs in support.
The Fed had said that some of the information being sought was made public in December. At that time, the Fed revealed details about all its crisis lending — except those involving commercial banks that borrowed from the discount window.
Most of the Fed’s crisis-era lending — more than $3 trillion — came through those other programs. Fed documents showed it gave trillions in emergency aid to U.S. and foreign banks as well as other companies. The disclosures were required under the financial overhaul law enacted last year.
Under the overhaul law, the Fed beginning in late 2012 must provide information on any commercial banks that draw emergency loans from its discount window. Those details will remain secret, though, for about two years after the borrowing occurs.
AP Business Writer Derek Kravitz contributed to this report.
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