By Gretchen Morgenson
Last week, the Fed provided spreadsheets identifying the companies that used the credit facility each day. Changes in these borrowings offer a window onto how quickly panic tore across Wall Street in September 2008.
For example, there were zero borrowings during August and even in early September, when Fannie Mae and Freddie Mac collapsed. But on Sept. 17, the day after the government rescued the American International Group with an $85 billion infusion, borrowings from the facility neared $60 billion. Lending in the facility peaked at $156 billion on Sept. 29, the day the House of Representatives voted down the Treasury’s bank bailout plan.
It is interesting to review the borrowings of specific companies. Right after Lehman failed, for example, Morgan Stanley began tapping into the credit facility every day; it didn’t stop until early March 2009. Morgan Stanley’s borrowings peaked at $61.3 billion on Sept. 29.
Between Sept. 15 and Nov. 26 of 2008, Goldman Sachs also tapped the facility each day. The company began by borrowing $2.5 billion; its peak was $24.2 billion on Oct. 15.
By Nov. 10, Goldman’s borrowings had fallen to $7 billion; that was the day the New York Fed said it would make Goldman and other A.I.G. trading partners whole on credit insurance they had purchased from A.I.G. on troubled mortgage securities. Under that deal, Goldman received $5.6 billion from the Fed.
All of the emergency lending data released by the Fed are highly revealing, but why weren’t they made public much earlier? That’s a question that Walker F. Todd, a research fellow at the American Institute for Economic Research, is asking.
Mr. Todd, a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland, said details about the Fed’s vast and various programs should have been available before the Dodd-Frank regulatory reform law was even written.
“The Fed’s current set of powers and the shape of the Dodd-Frank bill over all might have looked quite different if this information had been made public during the debate on the bill,” he said. “Had these tables been out there, I think Congress would have either said no to emergency lending authority or if you get it, it’s going to be a much lower number — half a trillion dollars in the aggregate.”
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