Fed Ramps Up Emergency Loan Program

WASHINGTON — The Federal Reserve boosted its lending to commercial banks and investment firms over the past week, indicating that a severe credit crisis was still squeezing the financial system.

The Fed released a report Friday saying commercial banks averaged $93.6 billion in daily borrowing for the week ending Wednesday. That was up from an average of $91.6 billion for the week ending Nov. 19.

The report also said investment firms borrowed an average of $52.4 billion from the Fed's emergency loan program over the week ending Wednesday, up from an average of $50.2 billion the previous week.

The Fed said its net holdings of business loans known as commercial paper over the week ending Wednesday averaged $282.2 billion, an increase of $16.5 billion from the previous week.

Financial firms are borrowing from the Fed because they are having trouble raising money through normal channels as the financial system endures its worst crisis since the Great Depression.

Banks are hoarding cash rather than making loans out of fear that they won't be repaid. The Fed and the Treasury have been flooding the financial system with money in hopes that banks can return lending operations to more normal levels.

The central bank on Oct. 27 began buying commercial paper, the short-term debt that companies use to pay everyday expenses. It was one of a series of moves the Fed has made to try to unfreeze credit markets.

The Fed's goal is to raise demand in this area as a way to boost the availability of commercial paper, which has been seriously constrained since the financial crisis hit with force in September.

The report said insurance giant American International Group's loan from the Fed averaged $79.6 billion for the week ending Wednesday. That was down by $5.6 billion from the average the previous week.

The reduction reflected a modification of the government's support program for AIG earlier this month. Under that change, Treasury stepped in with a $40 billion purchase of stock in AIG, using money from the government's $700 billion financial system rescue package. The increased support from Treasury allowed the Fed to reduce slightly the size of its total loans to AIG.

The Fed unveiled two new programs Tuesday in a further effort to get consumer credit flowing again.

It said it would begin buying mortgage-backed securities from mortgage giants such as Fannie Mae and Freddie Mac. And it announced a program to lend to financial firms that buy securities backed by various types of consumer debt, from credit cards to auto and student loans.

Comments

[PacificGatePost]

OBAMA WILL DO WHATEVER THE ECONOMISTS TELL HIM TO DO. PERIOD.

We have created unrestrained, and independent leadership in the form of omnipotent economists. They are not what they seem.

http://pacificgatepost.blogspot.com/2008/11/economists-our-new-philosopher-kings.html

Perhaps society has simply overplayed them.

[eddietru]

We no longer have a capitalist society. We are a Fascist economy, where profits are private and losses socialized, but are rapidly devolving into modern feudalism, where the state owns everything including the people.

[Veri]

This entire program is a scam. If $8 trillion dollars has not freed up the credit markets, where is it really going? Definitely not to unfreezing the credit markets. Whose pocketbook is it really going into, Mssrs. Paulson and Bernanke?

As for Rubin saying no one could have foreseen the crisis. Bollocks. These were highly educated men who knew exactly what they possible, and most likely, consequences of their criminal actions would have on the world economy.

They are the foot soldiers on the frontlines of the economic warfare currently engulfing the globe. Now, we need to find the real criminals. And strip them of their ill-gotten wealth.

[LeftRight]

"As for Rubin saying no one could have foreseen the crisis. Bollocks. These were highly educated men who knew exactly what they possible, and most likely, consequences of their criminal actions would have on the world economy."

Of COURSE it's Bollocks!! *I* foresaw this happening with NO education into the economy beyond what I've picked up through buying in it! The difference is that I happened to add in some actual knowledge of how people act and react!

[MadAppraiser]

Can the financial sector of corporate America destroy the domestic real estate industry, destroy American lives, and impact international financial markets? YES!!! Without credit mechanisms mainstream America collides with economic reality, NOW!

Our corporate financial architects are unrivaled, and have proven the effectiveness of their destructive economic creativity following the 1980"s savings and loan debacle. The sub prime mortgage crisis accelerated an inevitable collapse of corporate America"s collateralized financial lending stores. More than 300 American mortgage lenders are currently economically insolvent. America holds it breath as we view the economic impact of non-collateralized lending. America slides credit cards through credit card readers with interest schedules that compound daily on the unpaid balance, and stripping American citizens of their limited wealth.

After nearly 100 years of careful corporate financial engineering less than 1% of the American population controls the nations wealth. The cornerstone of the American economy is compounding debt perpetuated by obscene wealth distribution, and expanding income inequality. The income stream flows vertically from the bottom tier to the top tier of the American economic pyramid. Money management, and compounding debt creation are corporate America"s manufacturing employment vocations of the 21st century.

These corporate prevaricators have economically emasculated mainstream America, and now they stand in front of the United States Treasury with their hands out! America"s own corporate financial institutions are economically raping mainstream America as they pillage the United States Treasury with economic abandon.

[Novista]

Golly, there sure are a lot of people who love Hoover protectionism.

Smoot-Hawley was a bad idea then and now, as the markups flow through the distribution chain, who do you think will pay the higher retail prices?

[Harrier]

GM now wants to block the public from knowing about it's corporate flights an junketshttp://www.bloomberg.com/apps/news?pid=20601087&sid=afrKemH3i.2Y&refer=home

You cannot get more corrupt than this. Totally unwilling to play by any rules at all an payoff anyone they can to take money from the taxpayers rather than earn it

[Harrier]

Hard to believe with so many already unemployed and more joining those roles every hour.

[Cherubim]

Left Out of the Bailout:The Poor
http://www.time.com/time/nation/article/0,8599,1861843,00.html?imw=Y
An estimated 36.5 million Americans currently live below the poverty line, but those numbers will probably increase by as many as 10.3 million if current projections for the depth and duration of the recession hold true. According to the center's analysis, the number of poor children will grow by as many as 3.3 million. And the number of children in deep poverty, those in families living on less than half the wages of the official poverty line, will climb by as many as 2 million.

[hippynanainblingland]

Let's not forget those with even less than the poor: the homeless.

In the news today, a Washington State homeless shelter will have to close its doors, at the beginning of winter, because it cannot procure $50,000,000 it needs to keep its doors open for another year. Go figure.

Oh, and I almost forgot, the building they're housed in is being foreclosed.

[JLJL]

Am I the only one who thinks that these folks really don't know what they are doing. Agreed some sort of cash injection is needed to ensure the entire financial system doesn't come crashing down, but do these guys really have the skills and know to execute this task correctly. It seems they are just sprinkling a billion here and a billion there like confetti, without any kind of real understanding, and are very in-articulate to explain what they are up-to and how their actions will actually get us out of this mess.

[Excitedforfuture]

Or that this problem could have been less of a catastrophe if the current administration (or the banks themselves) would have helped re-do loans in order to avoid foreclosures? People would have had their homes, and no one would have defaulted on the mortgages, thus avoiding this whole mess. We would still have had a problem, because the economy sucked long before this mortgage meltdown, but at least it wouldn't have reached this point!

The redistribution of wealth to 5% has been a huge problem. The middle class are the people who keep the economy moving -- giving tax cuts to the wealthy only gives the wealthy more money, they don't necessarily buy more or invest in the economy. I know my husband and I would buy more if we could afford it. Hasn't happened in about 8 years!!!

[pat8942]

If the Fed took that 8 trillion and divided it up among all the taxpayers.
If there are approx. 130 million taxpayers each one would get about $61 thousand each.
People would buy things with that money,pay off loans and make mortgage payments and the economy would rebound quickly, but the Fed gives it to the banks and the economy continues to decline because nobody has money.
The consumer drives the economy not the big investment banks.

[sparkey]

That would be the sensible thing to do. Remember, this is the most crooked government in U.S. history. The friends of the crooks get their money first. That way, the friends can give part of that money back to the crooks so they can get re-elected to serve the people.

[RJII]

NO. NO. It's called trickle down bailout. Ya know, just like "Trickle down economics". Why would little folks want $61K, when we can sit on our hands waiting for credit to charge more with the banks. I luv plastic over cash. LOL.

[Viper]

That would get us in a few months/years right back to where we are!


People would buy foreign made cars, electronics, clothes and etc. Most of the benefit would flow towards China.

Until we make stuff here again and move to single payer healthcare.. there is no long term solution. Government should spend the money on Green and infrastructure and rebuild U.S. Mfg and pay for it with Tarrifs that at least match those we pay when we export ( to China as an example... 22.5%, Mexico 15%; Free trade my A$$).

Regards

[c-lupa]

Instead of funneling money into the system, why don't the Feds introduce and push through regulation to keep inappropriate lending from happening? Why are they throwing money at the problem only and not pushing for the reform our damaged system needs? There's no confidence unless the govt. instills the safeguards the financial system needs--Obama needs to come out and say, in his first week as President: here's what happened, here's what caused it, and these are the regulations we're enacting to make sure it doesn't happen again. I hope he's working on that right now. The money is there, the trust isn't. Reform of our financial systems will bring back that trust.

[Excitedforfuture]

That would be regulating greed!!! Republicans don't like to do that!

[bayviking]

tight credit?
hoarding cash?
free markets?

Goldman-Sachs, once the world's largest investment bank, now operates under FDIC as a commercial Bank. they got their bailout witout prior payment of FDIC insurance premiums. Rubin, Paulson both came from G-Sax and are only interested in concentrating and growing inherited wealth. They will take your money, but would never offer a lowly sucker an account at their sacred institution.

A $7.2 trillion giveaway will sink the average american trapped in a declining manufacturing base. More than WWII, the Marshall Plan, Korea, Vietnam, Social Security, the moon mission and entire NASA budget, Iraq, Katrina or a bailout of GM. Derivatives gambling exceeds all tangible assets worldwide. This economic state is a consequence of deregulation, under the facade of freedom and free markets.

why?

Our Government does not generate enough tax revenue to operate, or fight even a minor war. G-Sax and other bailout recipients have cheated our foriegn lenders. If these lenders are not made whole there will be no more money lent. Paulson doesn't want all his partners in crime to be sued in civil court,which will expose Wall Street Corrupton to thecountry and world. None of our fearless leaders want to be around when that day comes.

All we hear is BS. Paulson isn't just a simple liar, everything he's done has made things worse for our future.

[NiagaraFalls]

Seems to me an ideal time for these lousy banks who got part of the TARP funds to do a little lending to the automakers using a little encouragement from the Treasury. $25b is not that much once it is spread around to 20 or so financial institutions. Each one should make a loan at a reasonalbe rate, individually or in combination with the others, in proportion to the total amount that they received. Once an acceptable business plan is producted, of course.

Now there's a solution that can be replicated from one industry -or state/municipality- bailout to the next!

[Viper]

Detroit will need 100 billion in the end. Still a bargin. It can be paid for by import tarrfis on foriegn MFG goods, just like in Korea, Japan and China.

Regards

[jdfast]

I'm just holding my breath to see what happens next and if there will be any stipulations placed on the money. Most likely not. There have not been and the hand out continues. Lets see, CITI just got bailed out and they still have the naming rights to the Rose Bowl and the new stadium for the New York Mets. Wonder how much that cost us? Bail out? Right. The only bail out was that the banks got money supposedly to loan and now they won't loan it to other banks. They want to keep their balance sheets looking good for their investors and the government doesn't have enought balls to tell them to loan the money or loose it and go bankrupt. What a country we live in when we can't get money that was meant for the consumer and business because the banks are hording it and were given no direction other than some verbal stimulus to loan the money. Just makes me want to puke to see our money being given the the banks and they sit on it and commerce goes down the tubes. Thanks Washington for your wise assement of the problem. All of you should be gone.

[Veri]

With $8 trillion spent so far, the original plan of buying "toxic" assets would have worked. Instead, Bernanke and Paulson are using taxpayer dollars to buy controlling stakes in private corporations. The Fed, itself a private corporation will now hold almost complete, supreme economic power. That power directly translates into a centrally planned economy. All controlled by The Federal Reserve Note.

Congress authorized $700 billion under TARP. The Federal Reserve, on its own and without permission from Congress, has loaned dollars in the amount of $2 trillion and rising. Why doesn't The Fed have to ask permission from Congress before printing taxpayer dollars? Because they do not have to. What is Federal about that? Nothing. Private corporation, ladies and gentlemen.