Foreign Banks Big Takers of Fed's Emergency Funds


More than half of the emergency credit facility set up by the US Federal Reserve during the financial crisis went to foreign banks, the Financial Times [FT] reported Tuesday.

The FT cited its own analysis of Fed figures for the Term Auction Facility [TAF], which was started three years ago to provide one-month loans -- and subsequently three-month loans -- to creditworthy banks.

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However, the FT said details of just how the facility was used by some of the world's strongest banks might add to political criticism of the Fed.

The Netherlands' Rabobank and Canada’s Toronto-Dominion Bank -- among the few institutions in the world with triple-A credit ratings -- used a total of more than $20 billion in credit from the TAF, the newspaper said. Other heavy users included Belgium's Nexia and Germany's HSH Nordbank, which both needed state bailouts, and a clutch of Korean banks.

Ed Clark, Toronto-Dominion chief executive, told the FT that using the Fed's crisis fund made business sense. “That wasn’t how we made a lot of money. But you make a dollar here, you make a dollar there. What’s the spread you make on a billion dollars?” he said.

While the Fed declined to comment, it previously stated that all of its emergency credit was repaid in full with interest.

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