The worldwide financial crisis saw the Federal Reserve Bank giving out loans in excess of $3 trillion to banks both foreign and American, according to the United States banks recent disclosure – which was required due to the Dodd-Frank Act, which has been newly enacted.
The disclosure, which occurred last week, was of over 21,000 transactions and showed that major corporations and banks in the business sector globally relied heavily on money they had borrowed from the Federal Reserve Bank throughout the financial crisis.
Some of the major beneficiaries were the larger United States Banks such as Bank of America Corp, Goldman Sachs Group Inc, Citigroup Inc and Morgan Stanley & Co.
During the height of the financial crisis in 2008, lending was at its heaviest, and Bank of America, who bought the broker Merrill Lynch & Co. in the latter part of 2008, were still leaning on the Federal program up until May of 2009.
But it wasn’t just American banks that relied on the help of the Federal Reserve Bank as some of the largest beneficiaries were actually foreign companies. One of the largest amounts lent was in excess of $50 billion to subsidiaries of Barclays Bank Plc – who bought the United States operations of Lehman Brothers back in September of 2008.
And there were other European lenders who benefited from the Federal Reserve loans, such as Germany’s Deutsche Bank AG, France’s Societe Generale and Switzerland’s Credit Suisse Group and UBS AG.
Short term loans provided by the Federal Reserve financing service, also known as the Commercial Paper Funding Facility, were also provided to companies that chose to take advantage of the facilities, such as McDonalds Corp – the global fast-food operator, Verizon Communications Inc – the telecom firm, Harley-Davidson – the motorcycle manufacturer and General Electric Co – the conglomerate.
A spokesperson for the Federal Reserve said in a statement that “Over time, these programs helped to alleviate the strains and to restore normal functioning in a number of key financial markets, supporting the flow of credit to businesses and households.” The Fed also went on to say that programs such as these actually helped to restore trust in financial system of the Unites States and helped to avert an even deeper recession from occurring.
But there are some critics who simply don’t see it that way, as expressed by Sen. Bernie Sanders who is asking for an investigation into the Feds lending. “How many big banks repaid Treasury Department bailouts in order to avoid limits on executive compensation received no-strings attached loans from the Federal Reserve?”
He further stated “As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”