Fed Unveils Details on $1 Trillion in Lending, Doesn't Identify Borrowers
By Scott Lanman
June 10 (Bloomberg) -- The Federal Reserve unveiled its most detailed picture yet of its record $1 trillion expansion of credit, as Chairman Ben S. Bernanke responds to congressional pressure for greater transparency from the central bank.
For the first time, the Fed announced details on the number of borrowers and the ratings of securities pledged as collateral for loans. The data come in a new monthly report released by the central bank today in Washington.
The Fed said a total of 378 banks borrowed from its discount window in May or got funds from auctions of cash aimed at combating the liquidity crisis. Officials still stopped short of identifying the firms, a measure called for by some lawmakers and the subject of freedom-of-information requests and lawsuits.
Fed officials believe naming companies would undermine the central bank’s efforts to stabilize the economy, a senior Fed official said at a press briefing today.
“We will continue to look for opportunities to broaden the scope of information and analysis we provide,” Bernanke said in a statement today. The Fed statement said the central bank is providing “considerable new information.” Bernanke said in congressional testimony last week that the monthly reports would begin “soon.”
The 20-page document combines new data on collateral and the concentration of borrowers with information the central bank began disclosing in other reports on its Web site earlier this year as well as weekly balance-sheet figures.
‘Completely Insufficient’
Senator Bernie Sanders, the Vermont independent who sponsored an April 2 resolution that urged the Fed to identify borrowers and passed by a 20-vote margin, said today’s Fed report is “completely insufficient.”
“It is time for the Fed to name names,” Sanders said in a statement. The money “belongs to the American people,” and disclosure would show whether banks that are repaying the government’s capital injections are getting loans from the Fed, the senator said.
Among the new data, the Fed said an average 378 depository institutions borrowed $448 billion from the central bank in the four weeks ended May 27. That included 27 commercial banks with assets of more than $50 billion that took $257 billion, and 95 with less than $250 million in assets getting $1 billion.
Of the $618 billion in securities pledged as collateral to the Fed by banks, $125 billion are Treasuries or other federally backed assets, $215 billion have a AAA rating, $29 billion have a Baa/BBB rating and $131 billion have “other investment- grade” ratings that are “determined based on credit review” by the Fed.
Shore Up Market
Some 57 firms participated last month in the Fed’s program to shore up the market for corporate short-term debt. The top five commercial-paper issuers borrowed $57 billion on average in the four weeks ended May 27, out of the $159 billion total for the program. The bottom 47 firms took $73 billion.
The central bank said its lending to banks, bond dealers and American International Group Inc. produced $1.2 billion in interest income for the first three months of 2009, on a balance of $607.2 billion.
Also in the report, the Fed gave an update on the government’s January agreement to give Bank of America Corp. an aid package to help it absorb Merrill Lynch & Co. “The agreement has not yet been formally signed and is under review by the parties involved,” the Fed said.
Bank of America agreed to a loss-sharing plan with federal regulators in January on $118 billion in assets, mostly involving securities held by Merrill Lynch. Bank of America in May said it is negotiating to end that agreement because improving credit markets make the protection unnecessary.
Congressional Votes
The Fed’s effort at greater transparency in its emergency lending programs is a response to an April 2 nonbinding budget amendment sponsored by Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and the panel’s ranking Republican, Alabama Senator Richard Shelby, Bernanke said. That proposal passed 96-2.
The Fed didn’t mention the tougher measure, also nonbinding, sponsored by Sanders, which passed 59-39 on the same day. Bloomberg News filed a lawsuit against the Fed in November seeking the names of borrowers.
Sanders, in a statement last month, threatened to pass the measure again “in a stronger form” if Bernanke failed to accept it. Bernanke told Sanders in February that identifying borrowers would be “counterproductive” and result in “severe adverse consequences for the economy.”
May Be ‘Overblown’
Robert Eisenbeis, former research director of the Atlanta Fed, said those concerns “might be overblown” because borrowing from the Fed doesn’t have the stigma it did before the financial crisis. “Right now it’s not really a sign of weakness,” said Eisenbeis, who is chief monetary economist for Vineland, New Jersey-based Cumberland Advisors Inc.
The new monthly report will be released two weeks after each month’s final Wednesday, which is when the Fed closes its books each week, an official said. The officials spoke on condition of anonymity. |
