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Fed names banks that got bailed out

David Gura Dec 1, 2010

Fed names banks that got bailed out

David Gura Dec 1, 2010


Tess Vigeland: One of the great unsolved mysteries of the financial crisis of 2008 was which banks got how much bailout money, why and when?

Not gonna tell ya, said the Fed at the time. And the banks weren’t talking, either. We got the broad outlines. But the details remained hidden, in part to prevent people from taking all their money out of the banks that were teetering on the verge of insolvency. It was all a big secret, until today. As required by the financial reform act known as Dodd-Frank, the document dump reveals 21,000 transactions worth trillions of dollars.

Marketplace’s David Gura reports from Washington that all this just adds fuel to the debate over why the Fed did what it did.

David Gura: The Federal Reserve named names. The cast of characters is familiar: Citigroup, Bear Stearns, Goldman Sachs, AIG. The list goes on.

A handful of foreign banks got loans too, including Barclays and RBS. We found out how much they borrowed — and it was a lot. The Fed doled out $9 trillion in short-term loans to 18 different institutions.

I called Marvin Goodfriend, an economist at Carnegie Mellon, and I asked, “What’s the first thing you’re gonna do when you download this data?”

Marvin Goodfriend: There’s thousands of transactions here, so I don’t know when I’m going to do this, but I’m eager to read the summaries to see the extent to which the Federal Reserve protected taxpayers against fiscal losses.

Goodfriend wants to know whether loaning out that much money so fast meant the Fed was gambling with our tax dollars.

Goodfriend: The obligation of an independent central bank is to make sure that it protects taxpayers against losses in doing so.

Roberto Perli is with International Strategy & Investment. He says he doesn’t think the Fed took excessive risk, especially because it demanded so much collateral.

Roberto Perli: The vast majority of loans were way over-collateralized which tells me the Fed didn’t take inordinate credit risk here.

Historically, The Fed doesn’t release data like this. But the Dodd-Frank Act forced them to. Doug Elliott is an economist at the Brookings Institution. He says from now on, handouts to banks will have to be transparent.

Doug Elliott: If things improve, as I hope they will, we’re not going to care all that much. It’s in the heart of a crisis that you actually worry about what’s going on.

In Washington, I’m David Gura for Marketplace.

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