Federal Reserve Data Disclose Big Loans To Financial Organizations
Thursday, December 02, 2021 9:03 AM

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The Federal Reserve located in Washington released the data having a record of various emergency programs and steps taken by it to minimize the effects of economic crisis. The data record also inform about the banks, securities firm and companies which were benefitted by programs run during the financial crisis. Earlier Congress had ordered the release of the document.

Federal Reserve data provide listed details of more than 12,000 transactions made between December 2007 and July 2010. The data include short-term liquidity measures for financial institutions, liquidity injections directly to borrowers and investors in key credit markets and big financial help to many organizations.

The Federal Reserve data disclose the enormous financial help provided to various banks and companies. Citigroup acquired a loan of $2.2 trillion. Merill Lynch got $2.1 trillion. Morgan Stanley got help of $2tn whereas, Bank of America recieved help of $1.1 tn. The Fed has said that it was able to recover most of the loans it provided.

On 13 March 2008, Bear Stearns, another large US bank went through imminent insolvency and borrowed $12.9bn from the Federal Reserve. The loan has been repaid. The Bear which received total loan of $960bn during the financial crisis, finally collapsed and taken over by JP Morgan.

In September 2008, American International Group Inc (AIG), the insurance giant, borrowed $62bn from a credit facility to clear immediate debts. Many foreign banks like Barclays, Royal Bank of Scotland and Deutsche Bank also took financial help from the Fed to get relief from liquidity crisis.

The Fed has offered $3.3 trillion for emergency help; most of it was poured in since September 2008, when Lehman Brothers collapsed. Last month, the Fed announced to extend $600bn. This give rise to complaints that Federal bank is inciting inflation.

Let's see the list of emergency programs reported by the Fed run during the financial Crisis.

Term Auction Facility (TAF): Run in December 2007 to provide relief to strained bank funding markets.

Primary Dealer Credit Facility (PDCF): Created in March 2008, offering funds to primary dealers aimed to support overall financial markets.

Term Securities Lending Facility (TSLF): The TSLF issued Treasury securities to certain investment firms for one month on account of pledged collateral.

Central bank liquidity swaps: The Fed signed agreements with 14 central banks across the world to maintain liquidity in U.S. dollars in foreign markets.

Commercial Paper Funding Facility (CPFF): Meant for commercial paper market.

The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF): Aimed to boost asset-backed commercial paper market.

Money Market Investor Funding Facility (MMIFF): Created to restore liquidity in the money markets.

Term Asset-Backed Securities Loan Facility (TALF): Designed to revive the asset-backed securities market.

The above mentioned Federal Reserve program can be classified into three categories:

1. Programs designed to solve severe liquidity strains in key financial market

2. Programs offering credit to troubled systemically esteemed institutions

3. Programs encouraging economic recovery by lowering long term interest rates.

 

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