Fed Gives $9 Trillion in Emergency Bank Loans

American Monetary AssociationWe all knew about the $700 billion in bailout money given by the federal government to failing financial institutions in the midst of the recent crisis, but it turns out that was just chump change compared to what the Federal Reserve was doing at the same time with a mind boggling $9 trillion in emergency bank loans. Merrill Lynch, Morgan Stanley and Citigroup were the major recipients, each receiving a $2 trillion payout.

While we had some notion that the Fed made emergency bank loans under a special program during the rough patch, it was only recently that data was released defining the scope of the loans. Allegedly, the loans were backed by collateral and came with very low interest rates – in the 0.5% to 3.5% range. Some experts have gone on record as being astounded at the sheer size of the number and belief it was only action like this that kept the economy from toppling into a larger depression.

We have to wonder what actual good did the monumental loan amounts do for the Big Three? Merrill Lynch, for example, received $2.1 trillion spread across 226 separate loans, but ended up being bought by Bank of America. Citigroup received 279 loans for $2 trillion and is now owned in majority by the Treasury Department through the course of a separate government bailout. Other major banks, such as JP Morgan Chase “only” needed smaller amounts – $3 billion. The program, known as primary dealer credit facility, was officially discontinued in February of this year.

The Federal Reserve was opposed to the idea of releasing the information about the emergency bank loans any time soon, fearing that a panicked public could start a run on banks, wiping out the very financial institutions they were trying to save. We have to side with these paragons of virtue, for it is only when the spigot to the flow of information to the public is overseen by a caring Big Brother that we can truly rest easy knowing our best interest is always in their hearts. Right? Don’t want to bother the mice in the maze with the trivial details of what’s actually going on in the world around them.

The Fed can loan money to whomever they want. We really don’t care – it’s just that number is so BIG.

The American Monetary Association Team

American Monetary Association

Flickr / Cristiano Betta

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