Foreign Banks Among Biggest Recipients of Fed Loans

The US Federal Reserve, required by Congress to release details on trillions of dollars in loans made during the financial crisis, disclosed the surprising degree to which it supported struggling foreign banks in the worst days of 2008 and 2009, The Wall Street Journal reported Thursday.

Foreign banks received hundreds of billions of dollars in short-term loans from the Fed. Among the biggest loans from a Fed commercial-paper lending program was one to Swiss banking giant UBS, which tapped it for $37 billion in October 2008. Barclays, the British bank that declined to rescue Lehman Brothers but later bought much of it from bankruptcy, tapped the Fed for roughly $10 billion in commercial-paper loans in October 2008.

British newspapers reported Thursday that Barclays topped the list of Fed borrowers when taking into account a combined $232 billion that the bank borrowed from several Fed financing programs.

All the borrowings were repaid by the end of 2009, a Barclays spokesman said. A UBS representative said its borrowing was relatively modest, done to give it flexibility during the crisis, and was fully repaid.

The lending, most of which was paid back, represented the Fed's most aggressive intervention in the economy ever.

The scale of the Fed's lending was widely known. In total, it funneled $3.3 trillion worth of credit to different parts of the economy and financial system through an array of different programs during the crisis. But the specifics of who received the money were not previously revealed.

"It is clear foreign institutions were large users of the Fed's facilities, in part as a way to channel dollars to their European home bases," said Robert Eisenbeis, chief monetary economist at Cumberland Advisors.

In addition to making hundreds of billions of dollars of loans to banks, the Fed shipped nearly $600 billion of credit directly to foreign central banks.

Also on the list was the banking arm of the Korean government, foreign automakers and other foreign firms that held US mortgage-backed securities they could not sell when financial markets froze.

Among US banks, Goldman Sachs and Morgan Stanley borrowed directly from the Fed some 84 and 212 times, respectively, after the collapse of Lehman Brothers in September 2008.

Goldman's overnight loans peaked at $18 billion in mid-October 2008. Morgan Stanley borrowed more, as its chief executive John Mack complained that the bank was target of speculators betting it would fail. In its most troubled days in late September 2008, Morgan and its London arm borrowed nearly $60 billion.