August 23, 2007 Four banks each borrowed $500 million at the Federal Reserve's discount window, effectively in an act of statesmanship and a show of solidarity with the central bank’s effort to remove the taint of borrowing in advance of the coming crisis.
The banks -- Citigroup, Bank of America, JPMorgan and Wachovia--made a joint statement, which said that they were using the discount window in an effort to ''encourage its use by other financial institutions.''
Citigroup had said separately that it was ''pleased to inject liquidity into the financial system'' and that it would ''stand ready to continue to access the discount window as clients and needs warrant.''
Wells Fargo, the nation's fifth-largest bank at the time, had declined to comment about whether it had borrowed from the discount window, but said it had ''ample funds.''
December 2007 to July 2010: The Federal Reserve engages in 21,000 transactions between December 2007 and July 2010 involving eleven special lending facilities, which reached $3.3 trillion, or more than one fifth of the gross domestic product of the United States.
Aggregate amount loaned out, however, is in the tens of trillions, reports indicate. The loans provided by the Term Auction and Primary Dealer Credit facilities alone totted up to about $13 trillion -- about the size of the nation's GDP.
The Fed's Primary Dealer Credit Facility, the largest program by transaction volume, gave out a total of about $9 trillion in 1,381 overnight loans to the largest investment banks, averaging $6.5 billion. This program was launched after Bear Stearns collapsed into the arms of JPMorgan Chase in March 2008.
Goldman Sachs Group Inc.
“I think we would not have failed. We had cash."-- Goldman Sachs President Gary Cohn, Vanity Fair, January 2010
“We might have survived the credit crisis without government help.”-- Chief Executive Officer Lloyd Blankfein, Vanity Fair, January 2010
“None of them would have survived,” without government help.--Treasury Secretary Timothy Geithner, who was president of the Federal Reserve Bank of New York during 2008 and 2009, in an interview last December with Bloomberg Television’s “Political Capital with Al Hunt.”
Goldman relied heavily on the Fed right from the start of the crisis, for a total of 84 times between March 18, 2008 and November 26, 2008, with the largest transaction, amounting to $18 billion, taking place on October 15, 2008.
Its loans under the Fed programs totaled $600 billion, data show. The firm’s total borrowing from the Fed peaked at $35.39 billion on Oct. 21 and Oct. 22, 2008, the data show.
In its quarterly filings with the U.S. Securities and Exchange Commission, Goldman Sachs didn’t disclose that it borrowed from the PDCF. In part to ensure it could keep relying on the Fed for help, Goldman like Morgan Stanley agreed to become bank holding companies and submit to tighter regulation in the fall of 2008.
JPMorgan Chase & Co.
“For J.P. Morgan Chase, it was not a question of access or need--to the extent we needed it, the markets were always open to us --- but the [bailout] program did save us money."--J.P. Morgan Chase Chief Executive Jamie Dimon, in an April 2010 letter to shareholders
Seven times J.P. Morgan confidentially borrowed money from the Fed in 2008 and 2009 via a program called the Term Auction Facility, which was created so banks wouldn't have to show up at the Fed's so-called discount window and embarrassingly make their needs known to the public.
The second-biggest U.S. bank by assets borrowed $3 billion from the Primary Dealer Credit Facility on Sept. 15 and as much as $5 billion from the TSLF on Oct. 17, the data show.
“We did not need the liquidity or funding” on the day of Lehman’s bankruptcy, said Jennifer Zuccarelli, a JPMorgan spokeswoman. As Lehman’s collapse triggered broader financial turmoil, “we had been encouraged by our regulators to use their facilities when it was helpful to the marketplace and to remove any stigma,” Zuccarelli said at the time. JPMorgan borrowed less from those two programs than Goldman Sachs or Morgan Stanley. But it did borrow from a different Fed program that Goldman Sachs and Morgan Stanley did not use. JPMorgan Chase and its Chase Bank USA unit borrowed from the Term Asset Facility, established in December 2007 to provide term loans to depositary institutions.
JPMorgan has previously said that it borrowed from the Fed’s discount window without disclosing how much.
The borrowing occurred “during a time of immense financial turmoil throughout the banking sector and the broader market.”--Morgan Stanley statement.
"There is no question that the entire industry--including Morgan Stanley--benefited from TARP and the other initiatives undertaken by the government to stabilize financial markets." --James Gorman, Morgan Stanley CEO, from his April 2010 letter to shareholders
Morgan Stanley tapped the Fed’s Primary Dealer Credit Facility 212 times, more than any other financial institution. Morgan Stanley was clearly in a near death experience in the fall of 2008. Morgan Stanley, the second-biggest U.S. securities firm after Goldman Sachs, had like Goldman, converted into a bank holding company in the fall of 2008. It borrowed as much as $100.5 billion from Fed facilities on Sept. 29, 2008. That includes $61.3 billion of loans from the PDCF and $39.2 billion from the TSLF, the data show.
Sen. Bernie Sanders (I-VT) would later say that Morgan Stanley received nearly $2 trillion in emergency Fed lending, separate from the discount window.
"We owe taxpayers a huge debt of gratitude for assisting us at a critical time."--Citigroup CEO Vikram Pandit, quoted in an April 2010 press release
Citigroup turned to the Term Auction Facility 26 times. It also used the Primary Dealer Credit Facility almost daily through its investment banking unit, borrowing as much as $17.9 billion in late November 2008, around the time the government stepped in to bail out Citi in an historic, record bailout that amounted to loans and asset guarantees, a backstop to its troubled balance sheet, of about $306 billion.
Sen. Bernie Sanders (I-VT) would later tell FOXBusiness that his team pored through Fed disclosures and calculated that Citi received $1.8 trillion in emergency Fed lending, separate from the discount window.
Bank of America Corp.
Used the Fed’s Primary Dealer Credit Facility 15 times. The bank’s single biggest use of the facility was for $11 billion in October 2008 and seven times it took more than $10 billion at a time. Merrill Lynch used the facility 226 times. Its largest overnight transaction, carried out September 26, 2008, was $35 billion.
Sen. Bernie Sanders (I-VT) would later tell FOXBusiness that his team pored through Fed disclosures and calculated that Merrill Lynch received some $1.5 trillion in short term loans from the Fed, separate from the discount window.
"If we were not forced to take the TARP money, we would have been able to raise private capital at that time."--Wells Fargo Chairman Dick Kovacevich, in a March 16, 2009, Bloomberg
The government-mandated stress tests are "asinine." – Wells Fargo Chairman Dick Kovacevich
Wells Fargo ranked behind only Bank of America as the largest recipient of assistance under the Term Auction Facility program. Wells Fargo had $45 billion worth of borrowings as of late February 2009. The bank may have needed to borrow so much cash because it inherited a truly dreadful mortgage portfolio when it acquired Wachovia in late 2008.
"PIMCO's view is simple: Shake hands with the government; make them your partner by acknowledging that their checkbook represents the largest and most potent source of buying power in 2009 and beyond." --Pimco Founder Bill Gross, in his January 2009 investment outlook
Pimco borrowed from the Fed’s Term Asset-Backed Securities Loan Facility 96 times between April 2009 and March 2010 for a total of $7.26 billion.
"We have gained access to government funding programs that put us on equal footing with banks."--Jeffrey Immelt, General Electric's CEO, in his 2009 letter to shareholders
General Electric from late October to late November 2008 borrowed $16 billion from the Fed by selling commercial paper through the Fed’s Commercial Paper Funding Facility 12 times, even as the blue-ribbon company enjoyed the highest credit rating available at the time.
The Fed disclosures show that 82 companies borrowed $738 billion through the program, called the Commercial Paper Funding Facility.
In 2008, GE was the largest issuer of commercial paper in the country, with almost $100 billion outstanding at one point. The company since has slashed its dependence on this form of financing.
In November 2008, GE entered into another rescue program that let it sell CP at lower rates.
GE sold more than $21 billion in commercial paper in the final months of 2008 in this program, run by the FDIC. This was the Temporary Liquidity Guarantee Program, a FDIC program that guaranteed medium- and short-term debt offerings by banks. GE was not a bank at the time, but the FDIC changed the rules under pressure from then Treas Sec’y Hank Paulson and let GE to sell its debt at lower interest rates, and by spring of 2009 the company had issued $74 billion in commercial paper and longer-term notes under the FDIC program.
By early 2009, GE was out of the Fed program but had become the FDIC program's largest customer.
"We continue to work on putting various alternatives in place to fund the lending activities of HDFS and we believe we can continue to meet HDFS' liquidity needs."--James Ziemer, Harley-Davidson CEO, in his 2009 annual letter to shareholders
Harley-Davidson tapped the Fed for about $15 billion in short-term loans during October 2008.
Elizabeth MacDonald joined FOX Business Network (FBN) as stocks editor in September 2007 and is the author of Skirting Heresy: The Life and Times of Margery Kempe (Franciscan Media, June 2014).
Follow Elizabeth MacDonald on Twitter @LizMacDonaldFOX.