3.31.2011

The Night They Drove Old Dixie Down - Wachovia borrowed $29 billion on Oct. 6, 2008

Fed names banks that drew loans during crisis

Excerpt:

For the first time in its 98-year history, the Federal Reserve on Thursday identified banks that borrowed from its oldest lending program.

The Fed was compelled to name the banks that drew emergency loans during the financial crisis after the Supreme Court rejected a bid by major banks to keep that information secret. It's the latest sign of how the Fed is becoming more transparent -- either by choice or by force.

The central bank lent up to $110 billion through its emergency "discount window" at the height of the crisis. After Lehman Brothers collapsed in September 2008, banks turned to the Fed as a lender of last resort because their credit had frozen up. The Fed argued then that naming those banks could have stirred a panic, leading to a run on those banks and defeating the program's purpose.

The documents released Thursday showed that a range of large and small institutions borrowed from the program from August 2007 through March 2010.

Most of the lending took place in the two-month stretch between September and October 2008. The specific program that the banks drew from has been redacted from the documents, but the data points to most of the loans being through the "discount window." In many cases, those loans were paid back the following day.

Some of the biggest loans were drawn by the nation's largest banks. For example, U.S. Bank took out an overnight loan of $3.35 billion on Sept. 10, Wachovia borrowed $29 billion on Oct. 6, and Morgan Stanley drew more than $3 billion on Oct. 9.

Comment: The Night They Drove Old Dixie Down (one of my favorite The Band numbers). That day was the date Wachovia was forced into sale by the FDIC ...

1 comment:

  1. More on:

    Foreign Banks Tapped Fed's Lifeline Most as Bernanke Kept Borrowers Secret


    Wachovia Corp. was the only U.S. bank among the top five discount-window borrowers as the crisis peaked.

    The company, based in Charlotte, North Carolina, borrowed $29 billion from the discount window on Oct. 6, in the week after it almost collapsed, the data show. Wachovia agreed in principle to sell itself to Citigroup Inc. on Sept. 29, before announcing a definitive agreement to sell itself to Wells Fargo & Co. (WFC) on Oct. 3. The Wells Fargo deal closed at the end of 2008.

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