Courtesy of Pam Martens
New York Fed Headquarters Building in Lower Manhattan
The Federal Reserve Bank of New York first initiated its emergency overnight loans to Wall Street this year on Tuesday, September 17, starting off at the rate of $75 billion daily. It then increased its loans by adding, in addition to the $75 billion daily, 14-day term loans in the amount of $30 billion to be offered three times this past week. But after the demand for the first 14-day loan was more than double the $30 billion offered, the New York Fed boosted the next term loans to $60 billion and increased its overnight loans to $100 billion.
What will next week bring? When Wall Street can get super cheap loans from the Fed in the tens of billions of dollars with no questions asked by Congress, it will continue upping its demands until the Fed is once again secretly shelling out trillions of dollars while Congress willfully remains in the dark – in other words, a replay of the 2007-2010 financial crisis.
The New York Fed is only allowed to engage in these repo transactions with its 24 primary dealers. That list of 24 primary dealers includes the securities units of big U.S. banks like JPMorgan Chase, Citigroup, Bank of America and Wells Fargo, but it also includes the U.S. based securities units of troubled foreign banks like Deutsche Bank, Credit Suisse, and Societe Generale (SocGen).
Because the New York Fed is not announcing which banks are drawing down the bulk of its loans, neither Congress nor the American people know if the money is flowing to U.S. banks or foreign bank subsidiaries in the U.S. Propping up troubled foreign banks is not what most Americans want their central bank to be doing.
If the New York Fed is secretly funneling money to a unit of Deutsche Bank to prop it up, the American people need to know about it and Congress needs to be asking questions. The Fed already got away with this during the last financial crisis, secretly funneling $77 billion to Deutsche from the Term Auction Facility (TAF), $1 billion from the Primary Dealer Credit Facility (PDCF) and a whopping $277 billion to Deutsche Bank from the Term Securities Lending Facility (TSLF) for a grand total of $354 billion in secret funding that Congress never approved or even knew about.
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