Fed reveals aid deals for U.S., foreign banks

WASHINGTON - The Federal Reserve revealed details Wednesday of trillions of dollars in emergency aid it provided to U.S. and foreign banks during the financial crisis.

Newly released documents show that the most loan money over time went to Citigroup ($2.2 trillion), followed by Merrill Lynch ($2.1 trillion), Morgan Stanley ($2 trillion), Bank of America ($1.1 trillion), Bear Stearns ($960 billion), Goldman Sachs ($620 billion), JPMorgan Chase ($260 billion) and Wells Fargo ($150 billion). Many of the loans they took were worth billions and had short durations but were paid back and renewed many times.

Among the largest foreign bank recipients were Bank of England, Swiss National Bank, Barclays and Bank of Japan.

The documents are a reminder of how crippled the financial system had become and how much it's recovered since. Banks earned $14 billion from July through September this year.

The Fed released the data in the form of more than 21,000 transactions. The disclosures are required under the financial-overhaul law.

The documents detail more than $2 trillion the Fed lent through eight programs from December 2007 to July this year. The lending programs had never been used before and are now defunct. Most of the loans have been repaid, and none are overdue, Fed officials say.

In addition, the Fed disclosed details of "swap" arrangements with foreign central banks. The Fed traded much-in-demand dollars for foreign currencies to try to ease credit. The foreign central banks, in turn, lent the dollars to banks in their countries that needed dollar funding. The Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan were involved in the exchanges.

One of the emergency lending programs the Fed created provided low-cost, short-term loans to banks. Another sought to ease credit problems in the "commercial paper" market, which many U.S. companies use to finance everything from salaries to supplies.

The documents help illustrate the global scope of the crisis. The Federal Reserve provided credit lines to some of the largest central banks overseas: The European Central Bank took $8 trillion in temporary credit lines, while the Bank of England took $918 billion. That credit ensured that overseas markets wouldn't freeze for a lack of U.S. dollars, the global reserve currency.

by Jeannine Aversa Associated Press Dec. 2, 2010 12:00 AM





Fed reveals aid deals for U.S., foreign banks