Documents produced by the Federal Reserve in response to an order
from the Supreme Court show that Bernanke loaned billions to foreign
banks through its discount window. As Bloomberg - which brought the
lawsuit which resulted in the document release - notes:
biggest borrowers from the 97-year-old discount window as the program
reached its crisis-era peak were foreign banks, accounting for at least
70 percent of the $110.7 billion borrowed during the week in October
2008 when use of the program surged to a record. The disclosures may
stoke a reexamination of the risks posed to U.S. taxpayers by the
central bank’s role in global financial markets.
caricature of the Fed is that it was shoveling money to big New York
banks and a bunch of foreigners, and that is not conducive to its
long-run reputation,” said Vincent Reinhart, the Fed’s director of
monetary affairs from 2001 to 2007.
“The American people
are going to be outraged when they understand what has been going on,”
U.S. Representative Ron Paul, a Texas Republican who is chairman of the
House subcommittee that oversees the Fed, said in a Bloomberg Television
“What in the world are we doing thinking we can pass
out tens of billions of dollars to banks that are overseas?” said Paul,
who has advocated abolishing the Fed. “We have problems here at home
with people not being able to pay their mortgages, and they’re losing
Indeed, billions of dollars worth of loans went to Libya. Senator Sanders asks why we loaned billions to Libya:
Bernie Sanders (I-Vt.) today questioned why the Federal Reserve
provided more than $26 billion in credit to an Arab intermediary for the
Central Bank of Libya.
Sanders also asked why the
Libyan-owned bank and two of its branches in New York, N.Y., were
exempted from sanctions that the United States this month slapped on
other Libyan businesses to pressure Col. Moammar Gadhafi’s government.
is incomprehensible to me that while creditworthy 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
to a bank that is substantially owned by the Central Bank of Libya,”
In the same letter, Sanders asked
Treasury Secretary Timothy Geithner why the Treasury Department on
March 4 let the Libya-controlled bank skirt the economic sanctions
The senator also questioned why the Bahrain-based
Arab Banking Corp. is even allowed to operate branches inside United
States. “Why would the U.S. government allow a bank that is
predominantly owned by the Central Bank of Libya – an institution on
which the U.S. has imposed strict economic sanctions –to operate two
banking branches within our own borders?” Sanders asked.
Previous information released by the Fed shows that foreign banks were also huge recipients of the Term Auction Facility commercial paper.