{"id":3499,"date":"2011-11-28T13:59:44","date_gmt":"2011-11-28T18:59:44","guid":{"rendered":"http:\/\/stateimpact.npr.org\/new-hampshire\/?p=3499"},"modified":"2012-02-24T15:42:22","modified_gmt":"2012-02-24T20:42:22","slug":"big-banks-with-nh-branches-benefitted-from-secret-fed-loan-program","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/new-hampshire\/2011\/11\/28\/big-banks-with-nh-branches-benefitted-from-secret-fed-loan-program\/","title":{"rendered":"How Big Banks (Some With NH Branches) Benefitted From Secret Fed Loan Program"},"content":{"rendered":"
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Keith Ramsey \/ Flickr<\/p>

Bloomberg reporters followed the money...and found a massive, secret loan program.<\/p><\/div>\n

Recently, Bloomberg released a stunning report about a massive, secret bank loan program run by the Fed<\/a>.\u00a0 The story is the culmination of a two-year-old Freedom of Information request Bloomberg made to the central bank that was fought out in federal court.\u00a0 What the news organization won the right to see were thousands of pages of data about which banks got below-market-rate Fed loans, how much they got, and when.<\/p>\n

Bloomberg reporters Bob Ivry, Bradley Keoun, and Phil Kuntz\u00a0found:<\/p>\n

“A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.”<\/p><\/blockquote>\n

That’s compelling.\u00a0 But the raw numbers are even more so:<\/p>\n

“The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he ‘wasn\u2019t aware of the magnitude.’ It dwarfed the Treasury Department\u2019s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.<\/p>\n

‘TARP at least had some strings attached,’ says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program\u2019s executive-pay ceiling. ‘With the Fed programs, there was nothing.’<\/p>\n

Bankers didn\u2019t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC)<\/a> Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed \u201cone of the strongest and most stable major banks in the world.\u201d He didn\u2019t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.”<\/p><\/blockquote>\n

The Bloomberg reporters roll out example after example similar to the Bank of America<\/a> story.\u00a0 (B of A, incidentally, is one of a small handful of major banks with a presence in New Hampshire.)\u00a0 They also point out that many of the same banks that got secret Fed loans also got TARP money.\u00a0 Then, there’s the bargain-basement rates:<\/p>\n

“The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg.”<\/p><\/blockquote>\n

In the counter-point column, Ivry, Keoun, and Kuntz note the Fed<\/a> argument that the loan program fell under the central bank’s regulatory umbrella, and therefore it wasn’t necessary for its inner workings to be public knowledge.<\/p>\n

Besides the dollars-and-cents implications, the reporters found that Congress didn’t even know the scope of the program.\u00a0 And if they did, some votes on key bills during the financial crisis–TARP<\/a>, Dodd-Frank<\/a>, and even a failed measure to break-up too-big-to-fail banks–maybe <\/em>would have gone differently.\u00a0 And that’s a big maybe.\u00a0 Besides Ohio Democratic Senator Sherrod Brown, no one outright committed to the idea that positions on major legislation would change.\u00a0 But they did get some compelling quotes from major financial players in the Senate (including former New Hampshire Senator Judd Gregg):<\/p>\n

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Saul Loeb \/ AFP\/Getty Images<\/p>

Former US Senator Judd Gregg says he didn't know the scope of the Fed's loan program<\/p><\/div>\n

“‘I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,’ says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee.<\/p>\n

Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark.<\/p>\n

‘We didn\u2019t know the specifics,’ says Gregg, who\u2019s now an adviser to Goldman Sachs.<\/p>\n

‘We were aware emergency efforts were going on,’ Frank says. ‘We didn\u2019t know the specifics.'”<\/p><\/blockquote>\n

There’s a lot <\/em>more to the Bloomberg piece.\u00a0 You can read it here<\/a>, and it will be time well-spent.\u00a0 (In an earlier version of the story, they also threw in an interactive chart showing what the banks got–which we used below.)\u00a0 In the meantime, here’s a breakdown of which banks with Granite State outposts got Fed loans from August 2007 to April 2010–and Bloomberg’s data-based estimates of how much:<\/p>\n