Thursday, May 26, 2011

Fed Loaned $80B in Unrevealed "Secret" Loans At 0.01% Interest Rates

The Federal Reserve loaned $30 billion to each of Credit Suisse, Goldman Sachs., the Royal Bank of Scotland from the emergency lending program. The details "weren’t revealed to shareholders, members of Congress or the public", according to a Bloomberg report today

The ST OMO $80 billion initiative, "single-tranche open- market operations", made 28-day loans in  2008.
These 20 banks paid interest rates as low as 0.01%, when the Fed’s main lending facility charged 0.5%.

Continues Bloomberg: “This was a pure subsidy,” quoting Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta,“The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”

"The Federal Reserve Bank of New York, which oversaw ST OMO, posted aggregate data about the program on its website after each auction, said Jeffrey V. Smith, a New York Fed spokesman. By increasing the availability of short-term financing when private lenders were under pressure, “this program helped alleviate strains in financial markets and support the flow of credit to U.S. households and businesses,” he said."

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