Release of discount window data unveils large European bank bailout

On the brink of financial collapse, unidentified financial institutions were bailed out by the Federal Reserve discount window. The other day the Supreme Court ruled in favor of a Freedom of Information Act request the Fed had to reveal which banks borrowed from the discount window and the way much was loaned. The Fed’s revelations provide a stark portrait of the catastrophe Wall Street had wrought upon the world. Post resource – Release of discount window data reveals big European bank bailout by MoneyBlogNewz.

Fed bank bailout

In order for healthy financial institutions to get just a little bit of short term help in loans, the Fed crated the discount window. Because of the stigma in financial circles associated having to stand before the Fed with hat in hand, the identities of the borrowers have always been kept secret. But the Fed was forced to make the data public by the Supreme Court after it ruled in support of a Freedom of Information Act request filed by Bloomberg and Fox Business. Almost every bank in the world needed help as the global financial system was about to fall down totally, the fear of a stigma disappeared. There were over 25,000 pages of documents to go through. It showed that throughout the financial crisis, during a peak day, over $110 billion was lent by the Fed.

Most borrowing happened in European banks

In the course of the financial turmoil, Wall Street financial institutions got a lot of criticism for taking government bailout funds. The discount window banks were mostly European financial institutions though, the details showed. On Oct. 29, 2008, Belgian-French financial institution Dexia borrowed $26.5 billion and Dublin-based bank Depfa, owned by German mortgage lender Hypo Real Estate, borrowed $24.6 billion. There were other European banks to get billions from the discount window. These incorporated France's Societe Generale, Austria's Erste Group and Bank of Scotland. It was still the biggest bank failure in history in America considering Washington Mutual, on Thursday, Sept. 18, 2008, had to borrow $2 billion as a weekend loan. Until Wamu was taken over by J.P. Morgan Chase on Thursday, September 25, 2008, it kept getting the $2 billion loan overnight as it couldn't be paid back.

Details shows global extent of financial crisis

When the collapse of Lehman Brothers in September 2008 triggered the financial turmoil, the global economy went into a tailspin, the financial system froze and banks worldwide begged the Fed for help. The real damage was discovered when the discount window details sheets were released. There was a congressional panel in charge of a discount window investigation where Fed Chairman Ben Bernanke testified in November 2009. In this he said only one financial institution of all those that came for help from the discount window was not at risk to collapse entirely. In the 2010 Dodd-Frank financial reform bill, it is required for the discount window lending information to be released but only two years after the loan has been released.

Information from

Fox Business

foxbusiness.com/industries/2011/03/31/demystifying-feds-secretive-discount-window/

Wall Street Journal

online.wsj.com/article/SB10001424052748703712504576234700412932330.html

Reuters

reuters.com/article/2011/03/31/usa-fed-lending-idUSN3126104220110331?pageNumber=2