New Report Shows Federal Reserve
Allocation Of Emergency Financial Aid Funds

The Federal Reserve recently revealed details of the trillions in emergency aid it gave to U.S. and foreign banks and to non-bank companies ranging from General Electric to Caterpillar dealers during the financial crisis.

While the documents show, as expected, that most loan and other aid went to the giant banks, for the first time it became clear that the U.S. Fed was propping up financial institutions overseas as well. Large companies in the U.S. also show up on the list and used the Fed’s lending programs to pay employees or suppliers or to make loans through their subsidiaries. With private financing all but evaporated, GE borrowed more than $16 billion, Harley-Davidson $2.3 billion and a group of independent Caterpillar dealers $733 million.

“The system basically failed because banks stopped lending to each other,” said Paul Miller, a banking analyst at FBR Capital Markets. “The Fed essentially opened the floodgates and pushed as much liquidity into the system as possible. And it worked. It helped stabilize the system.”

The emergency credit programs had never been used before and are now defunct. Most of the loans have been repaid and none are overdue, according to Fed officials. ◆