Fed Directors Banks Lavished With Billions From Fed
The Federal Reserve Bank of Atlanta made six major loans to SunTrust Banks at the height of the financial crisis totaling at least $7.5 billion. James M. Wells, the Chairman and CEO of SunTrust, sits on the Board of Directors at the same Atlanta Fed that lent his company the money.
SunTrust also received $4.85 billion in bailout funds from TARP, a separate program run by the Treasury, on November 14th and December 31st of 2008.
According to data released Wednesday by the Federal Reserve, SunTrust's first billion dollars came on November 6, lent through the Fed's Term Auction Facility, a week before it received TARP money, A week after it took the TARP money, it took another billion dollars from the Atlanta Fed. On December 4, it took another $1.5 billion from the Atlanta Fed. The bank received two more billion dollar loans in January from the Atlanta Fed, followed by a May loan of $2.5 billion from the same bank.
The interest rates charged by the Atlanta Fed became more generous over time. The first loan was made with a 0.6 percent rate; the final three were made at 0.2, 0.25 and 0.25 percent. SunTrust, as collateral, put up mostly commercial real estate loans and other commercial loans.
The SunTrust loan is far from anomalous. On October 23, 2008, Fifth Third Bank received a $500 million loan through the Atlanta Fed as part of the Term Auction Facility. Dan Hogan is the CEO of Fifth Third Bank and also sits on the board of the Nashville branch of the Atlanta Fed. Fifth Third Bank also received billions of dollars through the Cleveland and Chicago Fed banks.
Banco Popular, based in Puerto Rico, scored nine loans from the Federal Reserve Bank of New York, through the Term Auction Facility, for between a hundred and 200 million dollars each between January of 2008 and July of 2009. Richard Carrion is the head of Banco Popular and sits on the board of the New York Fed, which was led at the time by Tim Geithner, who is now Treasury Secretary. Popular received $935 million in TARP money.
Sen. Bernie Sanders (I-Vt.), the Senate's lead author of the Fed audit language that led to Wednesday's disclosure, said that one aim of the transparency was to uncover conflicts of interest. Sanders and other advocated of Fed reform insist that bankers should not sit on boards with direct responsibility over the banks they lead.
A SunTrust spokesman didn't immediately return a call, nor did an Atlanta Fed spokesman.
UPDATE: "We'll refer you to the Atlanta Fed to discuss the role of its directors in the process," said Mike McCoy, a spokesman for SunTrust. "That said, I can note that we participated in the program --- and the borrowings were repaid on time and with interest."
UPDATE II: A spokeswoman for the Atlanta Fed said that the bank's credit and risk department evaluated applicants for TAF money, but that the final decisions were made by the New York Fed. "None of these decisions went before our board of directors," said Jean Tate.