UBS, Bar­clays rank among top users of $3.3tr: US Fed

La­hore, Is­lam­abad, Karachi Fri­day, De­cem­ber 03, 2010, Zul Haj 26, 1431

The Pak Banker - - Front Page -

NEW YORK: Fed­eral Re­serve data show­ing UBS AG and Bar­clays Plc ranked among the top users of $3.3 tril­lion from emer­gency pro­grams is stok­ing de­bate on whether U.S. reg­u­la­tors bear re­spon­si­bil­ity for aid­ing other na­tions' banks.

UBS was the biggest bor­rower un­der the Com­mer­cial Paper Fund­ing Fa­cil­ity, with $74.5 bil­lion over­all, more than twice as much as Cit­i­group Inc., the top U.S. bank re­cip­i­ent, ac­cord­ing to the data re­leased yes­ter­day. London-based Bar­clays Plc took the biggest sin­gle amount un­der an­other pro­gram that made overnight loans, when it got $47.9 bil­lion on Sept. 18, 2008. "We're talk­ing about huge sums of money go­ing to bail out large for­eign banks," said Sen­a­tor Bernard San­ders, the Ver­mont in­de­pen­dent who wrote the pro­vi­sion in the Dodd-Frank Act that re­quired the Fed dis­clo­sures. "Has the Fed­eral Re­serve be­come the cen­tral bank of the world? I think that is a ques­tion that needs to be ex­am­ined."

The first de­tailed ac­count­ing of U.S. ef­forts to spare Euro­pean banks may add to scru­tiny of the cen­tral bank, al­ready at its most in­tense in three decades. The Fed, which re­leased data on 21,000 trans­ac­tions, said in a state­ment that its 11 emer­gency pro­grams helped sta­bi­lize mar­kets and sup­port eco­nomic re­cov­ery. The Fed said there have been no credit losses on res­cue pro­grams that have been closed.

The growth of the U.S. mort­gage-backed se­cu­ri­ties mar­ket and the dol­lar's sta­tus as the world's re­serve cur­rency en­ticed over­seas banks such as Zurich-based UBS to buy as­sets in the coun­try be­fore 2008. They paid for the hold­ings with U.S. dol­lars, and when fund­ing seized up, the Fed­eral Re­serve re­fused to take the risk that Euro­pean firms would un­load the as­sets and fur­ther de­press mar­kets for hous­ing-re­lated in­vest­ments.

"Things would have been worse if they hadn't lent to for­eign­ers," said Perry Mehrling, se­nior fel­low at the Morin Cen­ter for Bank­ing and Fi­nan­cial Law at Bos­ton Uni­ver­sity and author of "The New Lom­bard Street: How the Fed be­came the Dealer of Last Re­sort." "We're fi­nally get­ting to un­der­stand the role of the Fed in the world."

Fed spread­sheets showed the cen­tral bank be­came the world's lender of last re­sort as dol­lars flowed to Euro­pean banks as well as Bank of Amer­ica Corp. and Wells Fargo & Co, among top bor­row­ers from the Term Auc­tion Fa­cil­ity at $45 bil­lion each.

Gold­man Sachs Group Inc., which posted record profit last year, bor­rowed more than $24 bil­lion from an­other pro­gram. Mil­wau­kee-based Har­leyDavid­son Inc. and Fair­field, Con­necti­cut-based Gen­eral Elec­tric Co. sold com­mer­cial paper, a form of short-term debt, to the Fed un­der a pro­gram that lent as much as $348.2b at its peak. -PB News

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.