Time for Fed to show who cri­sis loans ben­e­fited

The Pak Banker - - International3 -

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

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