Major Fed loans went to foreign banks
STEVE CHIOTAKIS: We’re still learning about all the banks that borrowed money from the Federal Reserve at the height of the financial crisis. Under court order, the Fed released thousands of pages covering which financials borrowed from its so-called discount window. And according to those documents, the central bank supplied emergency loans to not only the U.S. banking system, but to a lot of foreign banks as well.
Marketplace’s Europe Correspondent Stephen Beard is with us live from London with the latest. Hi Stephen.
STEPHEN BEARD: Hello Steve.
CHIOTAKIS: All right so take us back to this moment. Remind us why these loans are so important.
BEARD: OK, well we’re talking — I mean the key period under the spotlight here is October 2008, just after the collapse of Lehman Brothers. Credit was evaporating, liquidity drying up. Banks were on the brink, many of them and the Fed stepped up its emergency lending and in one week in that October it lent a record $110 billion. Now it’s emerged that almost three quarters of the sum was lent to foreign banks, that had a branch in the U.S.
CHIOTAKIS: And name some names Stephen. Which banks of note needed this help?
BEARD: Big mainstream lenders like British banks Barclays and Royal Bank of Scotland, the French bank Societe Generale. But some pretty odd cattle too. A Belgium bank that specializes in lending to local government in Belgium. They borrowed a total of $33.5 billion. Then there’s the Norinchukin Bank which provides financial services to Japanese fishermen. And my particular favorite, the Arab Banking Corporation which is part-owned by the central bank of Libya.
CHIOTAKIS: Libya? Is that bank connected to Colonel Gaddafi?
BEARD: Yes indeed — currently in a bunker somewhere in Tripoli. I should add however, Steve. All these banks repaid their loans.
CHIOTAKIS: All right. Marketplace’s Stephen Beard in London. Stephen thanks.
BEARD: OK Steve.
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