Time for Fed to show who crisis loans benefited
WASHINGTON: The Federal Reserve on Wednesday will have to disclose details about emergency loans made during the 2007-2009 financial meltdown, including who borrowed how much and what collateral was offered in return.
The findings, which must be revealed in accordance with a deadline set by a wide-ranging rewrite of U.S. financial rules enacted in July, could shed light on who benefited most from central bank's controversial efforts to support financial institutions and credit markets.
The results might also reignite debate about whether some bailouts, such as the support for insurer AIG (AIG.N), were appropriate.
As the financial crisis that began in the summer of 2007 spread beyond the housing sector to the nation's biggest banks, the Fed, under the leadership of Chairman Ben Bernanke, devised increasingly complex facilities to help restore confidence. Among these were loans to broker-dealers made outside the Fed's usual discount lending window for troubled institutions, which is reserved for deposit-taking commercial banks. Investors are curious to see how much money the likes of Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Merrill Lynch, now part of Bank of America (BAC.N), took from the central bank.
"I suspect a lot of institutions might have had their hand out," said Kim Rupert, a managing director at Action Economics in San Francisco. "I expect we'll see some fairly significant borrowings from some of the major financial institutions. It will be interesting to see what foreign institutions were very active." Other key emergency lending measures included an attempt to revive commercial paper markets with funding from the Fed, as well as a program aimed at securitization markets that also tapped central bank money as an incentive for new deals. -Reuters