Fed Window Open to Everyone Except Homeowners

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“Perhaps the most surprising revelation in Thursday’s documents was that foreign banks quickly became the largest and most frequent borrowers. On Sept. 15, 2008, the day that Lehman Brothers filed for bankruptcy, the Austrian bank Erste Group borrowed $4 billion. By the end of that week banks from Spain, France and Japan had also borrowed billions.”

EDITOR’S NOTE: This is blatant attempt to get us thinking that the mega banks were not behind the TARP nor the trillions in the Federal Reserve bailout.

The Fed’s Crisis Lending: A Billion Here, a Thousand There

By BINYAMIN APPELBAUM and JO CRAVEN McGINTY

WASHINGTON — The Federal Reserve’s huge lending programs, which saved Wall Street in the fall of 2008, also benefited a wide range of other financial companies, including community banks, credit unions and foreign banks, according to documents released by the central bank on Thursday.

Hundreds of small banks borrowed modest amounts of cash in 2008 and 2009, ranging from $1,000 to several million dollars, from an emergency loan program known as the discount window.

The Fed also used the discount window to make dozens of loans, often exceeding several billion dollars at a time, to the United States Central Federal Credit Union, helping to prevent a collapse that would have harmed hundreds of smaller credit unions. And the Fed helped to save some of the largest banks in Europe by pumping desperately needed dollars into their American subsidiaries. In fact, the biggest borrower from the Fed program was Dexia, a French-Belgian bank that frequently held more than $30 billion in outstanding loans from the program from late 2008 to early 2009.

The story of the Fed’s efforts to rescue giant banks like Merrill Lynch, Citigroup and Washington Mutual from the consequences of reckless lending and investments is already well known. The central bank released detailed information in December about the emergency programs it created to pump billions of dollars into those banks.

But the Fed fought long and hard to preserve the secrecy of transactions at the discount window, its oldest and most inclusive lending program. The grudging release of the data Thursday, in a format that impeded analysis, came only after a series of federal courts ruled in favor of lawsuits brought by Bloomberg News and Fox News.

The long list of borrowers, provided in the form of a daily loan register, gives a striking impression of a crisis spreading to every last corner of the financial system.

By late October 2008, the volume of outstanding loans topped $100 billion, with several dozen banks borrowing each day.

Some banks borrowed minimal amounts to test the process in case things got worse. For example, First City Bank in Fort Walton Beach, Fla., borrowed just $1,000 in October 2008 and repaid the money the next day.

“Our regulators encouraged us to do it,” the bank’s president, Robert E. Bennett Jr., said.

Other banks were already struggling to survive. Pacific National Bank of San Francisco borrowed 125 times from February 2008 to February 2009. The bank was closed by regulators in October 2009.

Borrowing from the discount window, even on a confidential basis, has long been viewed as a sign of weakness, to be avoided if at all possible. From 2003 to 2006, the Fed lent an average of less than $50 million each week.

By the summer of 2007, however, the Fed was increasingly concerned that banks were shunning necessary help. In August, officials cut the cost of borrowing from the discount window by half a percentage point. Then they arranged for four of the nation’s largest banks — Bank of America, Citigroup, JPMorgan Chase and Wachovia — to take what were described as symbolic loans of $500 million each.

The records released Thursday show that JPMorgan and Wachovia returned most of the money the next day. Bank of America and Citigroup, already showing signs of the problems they still face, kept the money for a month.

Perhaps the most surprising revelation in Thursday’s documents was that foreign banks quickly became the largest and most frequent borrowers. On Sept. 15, 2008, the day that Lehman Brothers filed for bankruptcy, the Austrian bank Erste Group borrowed $4 billion. By the end of that week banks from Spain, France and Japan had also borrowed billions.

An analysis of discount window lending from February 2008 to February 2009 shows that the vast majority of the loan volume went to foreign institutions.

Donald L. Kohn, the Fed’s vice chairman during the crisis, said that many foreign banks needed dollars to meet their financial obligations. The Fed arranged swaps with central banks in other countries to provide dollars, but the flow was insufficient.

“They not only borrowed dollars from their central banks, but they needed to borrow dollars from us as well,” said Mr. Kohn, now a fellow at the Brookings Institution.

Dexia was one of the most frequent and prolific borrowers.

By October 2008, the company’s American subsidiary was regularly visiting the discount window to renew what amounted to a line of credit that eventually reached into the tens of billions. The company continued to borrow from the Fed through November 2009, taking more than 100 short-term loans.

Dexia, which specialized in lending to municipalities, made the nearly fatal mistake of buying an American company that insured bonds — including subprime mortgage bonds. The governments of France, Belgium and Luxembourg invested about $9.2 billion to stabilize the company in 2008.

Ulrike Pommee, a spokeswoman for the company, described the information released Thursday as “backward-looking,” and said the bank had been open about its need for help.

“Dexia was one of the banks most dependent on central banks,” Ms. Pommee said in an e-mail. “The Fed played its role as central banker, providing liquidity to banks that needed it.”

The Arab Banking Corporation, partly owned by the Central Bank of Libya, was another frequent visitor, taking more than two dozen short-term loans of several hundred million dollars each.

“It is incomprehensible to me that while credit-worthy small businesses in Vermont and throughout the country could not receive affordable loans, the Federal Reserve was providing tens of billions of dollars in credit,” Senator Bernie Sanders, Independent of Vermont, wrote in a letter sent Thursday to the Fed chairman, Ben S. Bernanke, and other government officials.

The data also provided new details on the struggles of the largest banks.

Goldman Sachs, which has said that it borrowed from the window only as a test, took five loans of $1 million to $50 million between September 2008 and January 2010.

JPMorgan Chase, which lately has insisted that it did not need government aid during the crisis, also took discount window loans on several occasions, including a $3.5 billion loan in January 2008 on a day that it announced disappointing earnings.

The records show that several banks that failed or were forced into mergers borrowed heavily as problems deepened, including Wachovia, which is now part of Wells Fargo, and Washington Mutual, which is now part of JPMorgan Chase.

The Fed provided the data to reporters Thursday in the form of thousands of pages of electronic documents, loaded on a compact disc and distributed by hand.

Bankers have expressed concerns about the release of the discount window data, saying that the prospect of publicity will deter future borrowing.

“I think it will make it harder for people to use the discount window in the future,” Jamie Dimon, chief executive of JPMorgan Chase, said Wednesday.

Rob Gebeloff and Janet Roberts contributed from New York.

13 Responses

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  2. BSE,
    You need to tell your judge friend and all judges need to know, that after their all finished with us, THEIR NEXT.

    REMEMBER ALTHOUGH THERE IS NO PROOF CONFIRMING WHAT WAS “LEAKED” FROM the March 13, 2008 secret closed door meeting of the U.S. House of Representatives ACTUALLY CAME FROM MEMBERS OF CONGRESS, THERE’S ALSO NO PROOF OF DECONFIRMATION THAT IT DIDN’T OR THAT WHAT WAS LEAKED WASN’T ACCURATE. BUT NO JUDGES WERE INVITED (NOT EVEN THE SUPREME COURT). AND HERE’S WHAT WAS DAID TO HAVE BEEN

    “discussed:
    the possibility of retaliation against members of Congress for the collapses and the location of “safe facilities” for members of Congress and their families to reside during expected massive civil unrest”

    NO SAFE FACILITIES FOR ANY STATE OR FEDERAL JUDGES OR ANY STATE GOVERNMENT BRANCHES. SURE YOU CAN BRUSH IT OFF LIKE IT’S JUST SOME CRAZY “CONSPIRACY THEORIST’S” WILD IMAGINATION, BUT THEN AGAIN THIS WAS ALSO ‘PREDICTED’ (BY WHOM?)….
    “The imminent collapse of the U.S. economy to occur by September 2008, the imminent collapse of US federal government finances by February 2009, the possibility of Civil War inside the USA as a result of the collapse and advance round-ups of “insurgent U.S. citizens” likely to move against the government.”
    NOW WE MAY BE A LITTLE BEHIND ON THE TIME SCHEDULE AND ONLY HLFWAY THROUGH THE SCENARIO AT THE “imminent collapse of US federal government finances” , BUT SO FAR ACCURATE ENOUGH IF THIS DID COME FROM SOME ‘CONSPIRACY NUT’ WE NEED TO FIND HIM/HER AND REPLACE BERNANKE WITH HIM/HER BECAUSE WHOEVER IT IS COULD BE A WORLD LEADING ECONOMIST AND DO A FAR BETTER JOB THAN BERNAKE.

    THINK OF HOW MANY JUDGES THERE ARE, THINK ABOUT WHAT THE GOVERNMENTS PRIMARY CONCERN WAS WHEN REP. GIFFORDS WAS INJURED BUT JUDGE ROLL WAS KILLED (CONGRESS NOT THE JUDICIARY). JUDGES ARE ONLY DIGGING THEIR OWN GRAVES FOR THEMSELVES EVEN DEEPER. WHO ARE THEY GONNA HAVE TO LOOK TO WHEN CONGRESS TURNS THEIR BACKS ON THEM? CONGRESS AND OUR PRESIDENT (WHO HAVE SAFEHOUSES) COMMAND OUR MILITARY NOT THEM. WHAT GOOD IS FOLLOWING ORDERS TO BREAK THEIR OATHS GOING TO DO FOR THEM IF THEY’RE OFFERED NO SECURITY, BUT THE ONES GIVING THOSE ORDERS ARE?

  3. PATRICK FARRELL,

    I’ve actually downloaded instructions for the ‘strawman’ scenario you’ve described it all has to do with filing UCC papers, right?

    But at what point do you get involved with the courts or do they get involved with you after filing everything and what effect could it have post-fraudclosure and eviction?

    And also how would Judges react?

  4. Actually a “homeowner” can access the Fed window.
    YOu have to redeem your strawman,, establish Secured Party Creditor Status, and tell the Treasury to write off the mortgage, whether it is a Fraud or not.
    I have been in my home for 45 months for free.
    The note has been discharged with TARP, so the foreclosure is void.You all can do what you want.

  5. Let’s band together and fight for our children future

  6. BSE, where did you get the information about the senators talking to judges? If would be really great if we could find out which senators are doing this and to which judges? Are we talking about federal judges or state judges. I believe there are more lawsuits in state courts relating to foreclosure defense. Burmese8@yahoo.com

  7. E tolle indeed
    Obama is not to be taken seriously his speeches make peoples ass twitch can I say that ?
    I keep seeing in my minds eye the pied piper leading our children ( and their children who will ” have to live within their means”) through the mountain to whatever lies at the otherside I fear.
    As for the piper he has already Been paid, ” make no mistake about it”

  8. If I recall correctly, there was a very brief moment when the Fed window almost opened itself up, albeit slightly, for beleaguered homeowners with the tacit (not exactly expressed or written down legibly anywhere) design of helping those American homeowners in deep trouble with their housing situation.

    It was seemingly an unfortunate mishap (or should I say misHamp) that Geithner accidentally slammed the window shut, just as million of struggling homeowners were reaching in to receive the promised aid from the great community Organizer-in-Chief. As I recall….

    2/18/2009

    -PHOENIX — Seeking to tackle “a crisis unlike any we’ve ever known,” President Barack Obama unveiled an ambitious $75 billion plan Wednesday to keep as many as 9 million Americans from losing their homes to foreclosure.

    Announcing the plan in Arizona — a state especially hard hit by the housing crunch — Obama said that turning around the battered economy requires stemming the continuing tide of foreclosures. The housing crisis that began last year set many other factors in motion and helped lead to the current, widening recession.

    “In the end, all of us are paying a price for this home mortgage crisis,” Obama said at a high school outside Phoenix. “And all of us will pay an even steeper price if we allow this crisis to deepen.”

    But while talking in broad strokes about the importance of the issue to the economy as a whole, the president took care not to miss the pain that the housing problems are causing in individual families

    “The American Dream is being tested by a home mortgage crisis that not only threatens the stability of our economy but also the stability of families and neighborhoods,” he said. “While this crisis is vast, it begins just one house and one family at a time.”

    I’m going to go out on a limb here and make a wild guess that the Chicago residence belonging to the Obamas, although a victim of robo-signing in the past, has been spared the fate of millions, the receiving of a notice of acceleration or default. Just a guess.

    “This is necessary policy. It’s smart economics. And it’s just and fair,” Treasury Secretary Timothy Geithner told reporters.

    Asked why the cost had jumped to $75 billion from initial talk of a $50 billion effort, Geithner said, “We think that’s necessary to make a program like this work.”

    And he said relief would be almost instantaneous, basically as soon as rules are published March 4. “You’ll start to see the effects quite quickly”, Geithner said.

    Thank goodness! OMG this is great news! Oh wait….that’s March 4th from two years ago….maybe the wheels in D.C. just turn slowly? Surely this promised help is on the way, no?

    “The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly,” Obama said. “It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans.”

    He issued a warning as well: “All of us must learn to live within our means again.”

    Ouch! I’ve been bitch-slapped yet again by America’s CEO! Sure he’s right! I never should have lost my job and sold my rights to that derivatives contract taken out on my house! I should have argued that the appraisal was 6 figures too high….that, sure, I was being offered a refi as soon as my interest rate hit somewhere north of totally unaffordable…..I guess I’m just a bad businessman. It’s all my fault. I guess he’s right….I am a deadbeat, deserving no less than a cardboard box and a bridge for my retirement. What was I thinking?

  9. From ZeroHedge.com

    Tired of poring through thousands of PDF files from the Fed’s Bloomberg FOIA release? Curious why Ron Paul said that he “was surprised and deeply disturbed … to learn the staggering amount of money that went to foreign banks” and is planning to hold a hearing over emergency loans to the branches of non-U.S. banks? Then here is the excel file for you: the following publicly shared google docs spreadsheet contains the complete Discount Window loan origination data from March 14, 2008 through March 16, 2009. We offer it so that anyone who wishes to perform their own analysis on the primary data can do so (and needless to say banks noted as FORI in the markstat entity type are foreign borrowers).

    https://spreadsheets.google.com/ccc?key=0ArHUdrxFMmkTdGdvdHNNS3FQaXBwaWc5Y1EtNGtGZ3c&hl=en

  10. As mentioned before, a confirmed rumor, “US Senators are calling State and Federal Judges and urging the deaf ear and blind eye”. Judges are being told to cover up the fraud and kick the homeowner out into the street. US Senators both Republican and Democrats state within closed door meetings, ” Foreclosures must continue, it is the only way out”. It is fact!. We need to declare war upon the banks and kick the US Government out on the streets !

  11. WATCH CBS 60 MINUTES TONIGHT
    THEY ARE DOING A STORY ON FORECLOSURES

    Robo signer admits singing 4000 Documents
    a day! Wow..

    http://stopforeclosurefraud.com/2011/03/31/coming-60-minutes-sunday-april-3-2011-foreclosures/

  12. WATCH CBS 60 MINUTES TONIGHT
    THEY ARE DOING A STORY ON FORECLOSURES

    a Robo signer admits singing up to 4000 Documents a day! Wow…

    Tell everyone you now to Watch Tonight!

    http://stopforeclosurefraud.com/2011/03/31/coming-60-minutes-sunday-april-3-2011-foreclosures/

  13. Great Neil — your TITLE — “Fed Window Open to Everyone Except Homeowners”

    Have said before — I was waiting for the “crisis” to hit — knew the fraud was being concealed. I was so happy when I finally heard that the fraud was coming to light. That is — until Mr. Henry Paulson, Mr. Timothy Geithner, and Mr. Ben Bernanke — got involved to save the banks. From the onset, these “players” were going to let the homeowners go down — there would be little help for them. They said then — as it is said today — “The Foreclosures must go through.” I

    Some here may remember that I also wrote about the day Mr. Henry Paulson came to CNBC — to supposedly give an interview. Again, this was right after crisis exposure. Anchors gleefully announced that Paulson was in the lobby.. But, Paulson never spoke — and from that day on — the media began blaming the people — who they claimed “bought too much house.”

    “Everyone Except Homeowners” — absolutely correct — and the homeowners were – and continue to be — the victims.

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