The Federal Reserve has just released a vast trove of documents that detail a massive $3.3 trillion dollar aid program offered to the financial industry during the height of the financial crisis. Until now, the details of the program have been kept secret. But, thanks to a lawsuit from Bloomberg News and Congressional action, the details have now been made public.
As the financial community and press sift through the details of the 21,000 transactions from six loan programs, we'll be frequently updating this live blog.
Check back here for more updates on the Federal Reserve's latest document dump.
5:58 PM ET The Fed's Ridiculously Low Interest Rate
NEW YORK -- For the lucky few on Wall Street, the Federal Reserve sure was sweet.
Nine firms -- five of them foreign -- were able to borrow billion in U.S. government securities, which effectively act like cash on Wall Street, for four weeks at the minuscule interest rate of 0.0077 percent.
That is not a typo.
On 31 separate transactions, the lucky nine were able to borrow billions for 28 days as part of a crisis-era Fed program that lent the securities, known as Treasuries, for 28-day chunks to ensure that firms had cash on hand to lend, invest with and trade. The market was seizing up; effectively free money, courtesy of Uncle Same, helped it thaw.
The European firms -- Credit Suisse (Switzerland), Deutsche Bank (Germany), Royal Bank of Scotland (U.K.), Barclays (U.K.), and BNP Paribas (France) -- borrowed billion worth of Treasuries 19 different times, each paying just 3,561.64 in interest for the privilege. Deutsche led the way with seven such deals/
That's equal to 0.0077 percent interest for the 28-day loan. The annual interest rate equals 0.10 percent. -- Shahien Nasiripour
4:31 PM ET Fed Director's Bank Lavished With Billions From The Fed
The Federal Reserve Bank of Atlanta made six major loans to SunTrust Banks at the height of the financial crisis totaling at least .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 .85 billion in bailout funds from the TARP program 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, a week before it received TARP money, lent through the Fed's Term Auction Facility. A week after it took the TARP money, it took another billion dollars from the Atlanta Fed. On December 4, it took another .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 .5 billion from the same bank -- Ryan Grim
3:05 PM ET Funds Borrowed Billion
Mutual funds, hedge funds and bond funds borrowed more than billion from the Fed's Term Asset-Backed Securities Loan Facility, the WSJ reported. This includes .1 billion borrowed by the massive bond fund PIMCO, run by veteran investor Bill Gross.
2:27 PM ET Wall Street Pledged .3 TRILLION In Junk Collateral In Exchange For Cheap Fed Money
Wall Street firms teetering on the verge of collapse pledged more than .3 trillion in junk-rated securities to the Federal Reserve for cheap overnight loans - almost a quarter of all the long-term securities pledged to the Fed with a credit rating -- according to data released by the Fed on Wednesday.
The program, initiated to keep securities firms afloat during the height of a financial crisis that saw the collapse of two storied investment banks, the rescue of the world's largest insurance firm and the largest banks, was designed, in the Fed's words, to "improve the ability" of Wall Street's biggest firms to "provide financing to participants in securitization markets."
Essentially, the Fed gave Wall Street overnight loans with interest as low as 0.50 percent in order for the firms to have cash that they could then use to buy other securities or make loans. Those firms could trade with that cheap money and profit handsomely.
As collateral for those loans, Wall Street firms gave the Fed securities that were, in essence, junk.
Of the 50 overnight loans with the most speculative-grade securities pledged as collateral, 35 came from Citigroup. 11 of those loans were taken out by Morgan Stanley; two from Bank of America, and one each from defunct investment firm Lehman Brothers and Wall Street powerhouse Goldman Sachs.
The 18 firms, known as "primary dealers" because they're authorized to directly trade with the Fed, pledged ,315,863,900,000 in non-investment grade collateral for the loans from March 2008 to May 2009.
Overall, the firms pledged about .7 trillion in collateral, which came in the form of whole loans and securities. About .7 trillion of that came in the form of long-term securities with a credit rating. The totals likely include double-counting, as the firms may have pledged the same collateral on multiple days.
The loans totaled about trillion because the Fed took excess collateral in case its Wall Street borrowers defaulted.
The fact that Wall Street was able to pledge junk to the Fed in exchange for cheap financing is likely to enrage lawmakers who view the Bush and Obama-era crisis programs as largely benefiting Wall Street while "Main Street" has been left behind.
Adding insult to the perceived slight, banks have ramped up their requirements for new loans to borrowers, making it ever more difficult for cash-strapped households and businesses to take out new commitments. -- Shahien Nasiripour
2:03 PM ET Two European Megabanks Got A Windfall From The Fed
NEW YORK -- The Federal Reserve on Wednesday reluctantly opened the books on its monumental campaign to save the financial system in the midst of the recent crisis, revealing how it distributed some .3 trillion in relief.
The data revealed that the Fed's aid was scattered much more widely than previously understood. Two European megabanks -- Deutsche Bank and Credit Suisse -- were the largest beneficiaries of the Fed's purchase of mortgage-backed securities. The Fed's dollars also flowed to major American companies that are not financial players, including McDonald's and Harley-Davidson, through unsecured short-term loans.
The measure, initiated in Jan. 2009 to stimulate the flow of credit and keep household borrowing costs low, led the nation's central bank to purchase more than .1 trillion in mortgages packaged into the form of securities. The mortgage bonds are backed by Fannie Mae and Freddie Mac, the twin mortgage giants now owned by taxpayers.
Deutsche Bank, a German lender, has sold the Fed more than 0 billion worth of mortgage securities, Fed data through July shows. Credit Suisse, a Swiss bank, sold the Fed more than 7 billion in mortgage bonds -- Shahien Nasiripour
1:06 PM ET Even Non-Financial Firms Got Into Fed's Lending
UPDATE: A previous version of this post incorrectly stated that McDonald's was one of the recipients of Federal Reserve aid. A McDonald's representative said that the Federal Reserve erroneously listed the restaurant chain on its aid recipients list. The actual aid recipient was Golden Funding Corporation.
The Federal Reserve’s Commercial Paper Funding Facility (CPFF) presents a particularly stark portrait of the depth of the crisis in the fall of 2008. Commercial paper refers to short-term loans that businesses and some governments use to fund day-to-day operation. The market for such paper was quickly freezing up, as money market and mutual funds backed away, worried about the solvency of the corporations. The Fed jumped in to start buying the paper, sending cash to more than a thousand companies and foreign governments, including Mitsubishi, Harley-Davidson, Amstel Funding Corp., GE, to the Bank or Korea. Bank of America was on the receiving end of several billion in such loans made over several days. The Fed says that all these loans were repaid. -- Ryan Grim
12:50 PM ET A Handy Guide To The Fed's Alphabet Soup
If you don't know your PDCF from your TAF, FT Alphaville has this handy guide to the Fed's headache-inducing series of acronyms.
One crucial program to keep an eye on is the Fed's Term Auction Facility (TAF). In short, the details behind this program are sure to reveal which companies got aid, how much they got and under what terms. Here's Alphaville:
The TAF was started in late 2007 as a way for the US central bank to help short-term liquidity among commercial banks. The Fed would auction off short-term loans to banks — in exchange for a very wide variety of collateral — and only for those that were judged to be “financially sound” by their local Fed branches. At the time, the auction format was deemed less ’stigmatic’ than borrowing directly from the Fed’s discount window, but plenty of commenters suspected banks would still only be using the kind of collateral for the TAF that they couldn’t find buyers for in the private market.
Keep checking back here for more udpates.
12:26 PM ET Federal Reserves Official Release
Here's the Fed's official breakdown of their crisis-era lending program. You can find more information at the Fed's website -- and check back here for regular updates.
The Federal Reserve Board on Wednesday posted detailed information on its public website about more than 21,000 individual credit and other transactions conducted to stabilize markets during the recent financial crisis, restore the flow of credit to American families and businesses, and support economic recovery and job creation in the aftermath of the crisis.
Many of the transactions, conducted through a variety of broad-based lending facilities, provided liquidity to financial institutions and markets through fully secured, mostly short-term loans. Purchases of agency mortgage-backed securities (MBS) supported mortgage and housing markets, lowered longer-term interest rates, and fostered economic growth. Dollar liquidity swap lines with foreign central banks helped stabilize dollar funding markets abroad, thus contributing to the restoration of stability in U.S. markets. Other transactions provided liquidity to particular institutions whose disorderly failure could have severely stressed an already fragile financial system.
As financial conditions have improved, the need for the broad-based facilities has dissipated, and most were closed earlier this year. The Federal Reserve followed sound risk-management practices in administering all of these programs, incurred no credit losses on programs that have been wound down, and expects to incur no credit losses on the few remaining programs. These facilities were open to participants that met clearly outlined eligibility criteria; participation in them reflected the severe market disruptions during the financial crisis and generally did not reflect participants' financial weakness.
The Federal Reserve is committed to transparency and has previously provided extensive aggregate information on its facilities in weekly and monthly reports. As provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, transaction-level details now are posted from December 1, 2007, to July 21, 2010, in the following programs:* Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)
* Term Asset-Backed Securities Loan Facility (TALF)
* Primary Dealer Credit Facility (PDCF)
* Commercial Paper Funding Facility (CPFF)
* Term Securities Lending Facility (TSLF)
* TSLF Options Program (TOP)
* Term Auction Facility (TAF)
* Agency MBS purchases
* Dollar liquidity swap lines with foreign central banks
* Assistance to Bear Stearns, including Maiden Lane
* Assistance to American International Group, including Maiden Lane II and III
Additionally, discount window and open market operation transactions after July 21, 2010, will be posted with a two-year lag.
The data made available Wednesday can be downloaded in multiple formats, including Excel, at www.federalreserve.gov/newsevents/reform_transaction.htm. The Excel files allow users to search, sort, and filter the data for each program in multiple categories. The site also provides explanations of each program as well as definitions for the data elements.
In the case of broad-based facilities, details provided include the name of the borrower, the amount borrowed, the date the credit was extended, the interest rate charged, information about collateral, and other relevant credit terms. Similar information is provided for the draws of foreign central banks on their dollar liquidity swap lines with the Federal Reserve. For agency MBS transactions, details include the name of the counterparty, the security purchased or sold, and the date, amount, and price of the transaction.