When the financial crisis of 2008 erupted and threatened to take down Wall Street’s biggest institutions, the federal government rode to the rescue, with even more money than was previously disclosed. In addition to the well-publicized disbursement of $160 billion from the Department of the Treasury, the Federal Reserve, using seven different programs, made emergency loans totaling more than $1 trillion to America’s elite financial and business institutions.

 

Big U.S. banks alone received nearly $670 billion in cheap Fed loans. The largest borrower, Morgan Stanley, accepted $107.3 billion from the Federal Reserve's secret Primary Dealer Credit Facility and Term Securities Lending Facility, while Citigroup got $99.5 billion and Bank of America $91.4 billion, according to Bloomberg News, which won a long legal battle with the Fed to get it to release loan records from 2008. For Morgan Stanley, its borrowing peak was almost triple its total profits for the decade.

 

“These are all whopping numbers,” Robert Litan, a former Justice Department official who helped probe the causes of the savings and loan crisis, told Bloomberg. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

 

Europe’s elite also received plenty of assistance from the Fed. Almost half of the top 30 borrowers were European firms, including Royal Bank of Scotland ($84.5 billion), UBS AG of Switzerland ($77.2 billion) and Germany’s Hypo Real Estate Holding AG ($28.7 billion).

 

The total amount loaned to the big banks, about $1.2 trillion, was almost triple the federal budget deficit for 2008. It is also almost the exact amount currently owed by the 6.5 million homeowners who are past due on their mortgage payments of in foreclosure.

-Noel Brinkerhoff

 

Wall Street Aristocracy Got $1.2 Trillion in Secret Loans at Lowest Rates (by Bradley Keoun and Phil Kuntz, Bloomberg)

Federal Reserve Gave Big Banks Enormous Secret Loans at Ridiculous Rates (by David Wallechinsky and Noel Brinkerhoff, AllGov)