Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep at least some Fed borrowings secret. In March 2011, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.
Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness..
Herring, the University of Pennsylvania professor, said some banks may have used the program to maximize profits by borrowing “from the cheapest source [with the lowest interest rate charged anywhere to borrowing banks, at 1%], because this was supposed to be secret and never revealed.”
“Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?” [Better still, why the hell did the Federal Reserve find it ethically acceptable to loan to banks with portfolios full of bad debt, at an interest rate of 1%, when the banks were still charging 3% interest on their own bad loans - driving up their 'losses' even further for 'bailout needs' as time went on? What a pyramid scheme!] U.S. Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. “They [the banks] get help when the average businessperson down in eastern North Carolina, and probably across America, they can’t even go to a bank they’ve been banking with for 15 or 20 years and get a loan.”
How ironic is it, that Mr. J.P. Morgan (founder of JP Morgan, one of the major borrowers from the federal program) was among the group of bankers who first went to the president back in 1911? and convinced him to form the semi-private Federal Reserve Bank...
We make a living by what we get, we make a life by what we give. - Sir Winston Churchill
