European banks took big slice of Fed aid
By Robin Harding and Tom Braithwaite in Washington and Francesco Guerrera in New York
Published: December 1 2010 17:30 | Last updated: December 2 2010 00:12
Foreign banks were among the biggest beneficiaries of the $3,300bn in emergency credit provided by the Federal Reserve during the crisis, according to new data on the extraordinary efforts of the US authorities to save the global financial system.
The revelation of the scale of overseas lenders borrowing underlines the global nature of the turmoil and the crucial role of the Fed as the lender of last resort for the worlds banking sector.
However, news that banks such as Barclays of the UK, Switzerlands UBS and Dexia of Belgium borrowed billions of dollars at favourable terms from US authorities may further anger critics already enraged about the Feds rescue of Wall Street.
Were talking about huge sums of money going to bail out large foreign banks, said Bernie Sanders, the independent senator from Vermont. Has the Federal Reserve of the United States become the central bank of the world?
Under the Dodd-Frank financial reform act, the Fed on Wednesday detailed more than 21,000 transactions with banks carried out through half a dozen special financing programmes starting in 2007. They include the Primary Dealer Credit Facility (PDCF) for overnight funding of investment banks and the Term Auction Facility (TAF) for one- to three-month loans.
Barclays was the biggest cumulative borrower from TAF. The UK bank, which bought the US operations of Lehman Brothers out of bankruptcy in September 2008, borrowed a cumulative $232bn from the TAF through various subsidiaries.
Bank of Scotland and RBS of the UK, Société Générale of France, Dresdner Bank and Bayerische Landesbank of Germany, and Dexia of Belgium were all among the top 10 cumulative users of TAF. At any given time, these borrowers owed less than the total amount because the short-term loans were extended after they expired.
The largest TAF user at a single point in time was Bank of America, which borrowed $60bn in the spring of 2009, followed by Wachovia, Wells Fargo, JPMorgan Chase and Barclays.
The biggest seller of commercial paper to the Feds Commercial Paper Funding Facility, which bought illiquid short-term loans, was UBS of Switzerland, then the insurer AIG. Five of the top 10 CPFF users were European banks. Merrill Lynch, which is now part of BofA, was the biggest user of the PDCF, followed by Citigroup.
Barclays said it had repaid all the relevant facilities that it accessed in the USA by end December 2009. RBS said it no longer makes use of any Federal Reserve schemes  ... and all money borrowed  ... has now been repaid in full with interest. UBS said its use of the Feds facilities was relatively modest given its presence in the US.
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