This is outrageous! The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record. The disclosures may stoke a reexamination of the risks posed to U.S. taxpayers by the central bankâs role in global financial markets. http://www.bloomberg.com/news/2011-...e-most-as-bernanke-kept-borrowers-secret.html
It might sound crazy on the face of it, but isn't it possible the success of our banks also depended on foreign banks staying afloat? I don' t know, but that's my thought. I guess we'll see what justification is given
I gotta hear this......... Oilas many of our own banks went under during this period...think about that.
Well, I am not sure how "supporting foreign banks" comes into this... These are O/N loans secured by USD-denominated eligible collateral. What do you think would have happened to US banks if Depfa and Dexia (the two banks that went to the discount window the most during the peak of its use) had to have a firesale of their assets into a completely bidless mkt, 'cause they couldn't get them funded? Where do you think the money mkt rates would have been if Depfa and Dexia couldn't access the window and had to borrow in the mkt? Whether you like it or not, by 2008 the financial system was globalized. Now it may be a very bad thing indeed that residential construction and mtges in the US of A were (partly) financed by clueless European punters, but denying them liquidity during the crisis would have been well and truly equivalent to cutting off one's nose to spite one's face.
The American taxpayer ultimately "stands behind" all of the $USDs in circulation, spent, or lent. Sure, the Federal Reserve does its self-serving skulduggery, but "we the people" will have to pay for things, one way or another. (Including having the buying power of our assets WIPED OUT through currency devaluation and inflation). Shouldn't we KNOW what the Fed is up to? Shouldn't we have a "say" in things? SHOULD THE FEDERAL RESERVE BE ALLOWED TO OBLIGATE THE US TAXPAYER TO "PAY FOR ANYThING THE FED WISHES"?
that's a fair point, and I'm certainly no expert. But seems logical that some are just too big to fail, that would bring down the whole system.
-It puts more USD into the foreign markets -The US Govt. ends up with more proceeds from the interest paid back in.(before you start, stop and fucking think: interest is more than just a rate paid back. outflows of USD to other markets affect forex crosses, for one....)
I don't pretend to understand things at this point, but I have enough sense to wait for an explanation before attacking the Fed. I'm going be bet they have a logical explanation as to why it was important to open the discount window to foreign banks as well. Otherwise, why would they do it?