Fed ‘08 Minutes Show Extent Of Worry Over AIG, Citi

Discussion in 'Wall St. News' started by ASusilovic, Mar 13, 2009.

  1. Minutes from about 25 Federal Reserve Board meetings late last year, released Wednesday, reveal the extent of concern officials had over the potential repercussions that failures of AIG and Citigroup could have triggered in global financial markets.

    In the Fed’s initial decision to extend an $85 billion lifeline to American International Group Inc., on Sept. 16, 2008, officials judged that “the company faced the imminent prospect of declaring bankruptcy,” according to the minutes.

    “Board members agreed that the disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility and that the best alternative available was to lend to AIG to assist it in meeting its obligations in an orderly manner as they came due,” according to the minutes of that meeting.

    AIG tapped $62 billion of that loan by Oct. 1, the Fed noted in the minutes of a subsequent meeting on Oct. 6 in which the Board voted to set up a securities lending facility for AIG. As part of their discussion, officials considered “the likelihood that no incremental losses would be assumed by the Federal Reserve due to the high-quality collateral taken under the proposed facility and the additional protections provided by the terms of the proposed facility.”

    They also weighed “possible risk of loss to the Federal Reserve from the disorderly failure of AIG,” according to the minutes.

    In the minutes of a Nov. 23 meeting in which Board members agreed to take part in a joint Treasury-Fed-FDIC rescue of Citigroup Inc., the Fed said “available evidence suggested that investors were becoming increasingly concerned about the company’s prospects, which would threaten Citigroup’s ability to continue to obtain funding.”

    Meeting minutes released Wednesday cover the dramatic steps officials took to put out a slew of fires from the AIG and Citi rescues to creation of new credit facilities for commercial paper, money market funds and asset-backed securities as well as a decision to allow Fannie Mae and Freddie Mac to borrow from the Fed’s discount window.

    The minutes also reveal the daunting workload the Washington, D.C.-based Board of Governors faced at a time when they were operating at less than full strength.

    They also highlight the extent to which key decisions were being undertaken by the five-member Board - which is supposed to have seven members - and not the Federal Open Market Committee, which includes both the Board of Governors and regional bank presidents.

  2. And we all thought Cheney was running things......:eek: :eek:
  3. Aren't those minutes strategically released? If they're cherry picked, then they could say anything during those, sort of a PR instead of being honest and capturing their conversations.
  4. market surges 8% this week

    any1 care about citi? nope.