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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Fed reveals emergency borrowers

WASHINGTON — For the first time in its 98-year history, the Federal Reserve on Thursday identified banks that borrowed from its oldest lending program, naming those that drew emergency loans during the financial crisis.

The Fed was forced to make the information public after the Supreme Court rejected a bid by major banks to keep it secret.

The central bank lent up to $110 billion through its emergency “discount window” at the height of the crisis. At the time, banks were turning to the Fed as a lender of last resort because their credit had frozen up. The Fed argued then that naming banks that used its discount window could cause a run on them, endangering the institutions and defeating the program’s purpose.

The documents released Thursday provided details about which banks borrowed from the program from August 2007 through March 2010. Big U.S. banks, such as Wachovia and Morgan Stanley, took out short-term loans of $6 billion and $1.25 billion, respectively, in the fall of 2008, the documents showed.

Some of the largest foreign banks used the program, too. Barclay’s borrowed $1 billion.

Smaller institutions also drew from the discount window during the financial crisis.

Washington Mutual Bank took out $10 billion worth of short-term, mostly overnight, loans in the week leading to its failure. Its collapse was the biggest for a bank in U.S. history.

One day before it failed, Washington Mutual took out a $2 billion overnight loan, the documents show. The day it failed, Sept. 25, 2008, Washington Mutual took out another one-day $2 billion loan. JPMorgan Chase ended up buying the bank.

Few loans are being made now because most banks are in much better health. And both the financial industry and the economy have strengthened.

Under the overhaul law, the Fed beginning in late 2012 must provide information on any commercial banks that draw emergency loans from its discount window. Those details will remain secret, though, for about two years after the borrowing occurs.