The Fed: The Bank Run We Knew So Little About

The New York Times reports:

In August 2007, as world financial markets were seizing up, domestic and foreign banks began lining up for cash from the Federal Reserve Bank of New York.

That Aug. 20, Commerzbank of Germany borrowed $350 million at the Fed’s discount window. Two days later, Citigroup, JPMorgan Chase, Bank of America and the Wachovia Corporation each received $500 million. As collateral for all these loans, the banks put up a total of $213 billion in asset-backed securities, commercial loans and residential mortgages, including second liens.

Thus began the bank run that set off the financial crisis of 2008. But unlike other bank runs, this one was invisible to most Americans.

Until last week, that is, when the Fed pulled back the curtain. Responding to a court ruling, it made public thousands of pages of confidential lending documents from the crisis.

Defenders of the European welfare state have been quite quiet about foreign institutions needing a bailout from the Fed. How ironic, the highly regulated European banks needed more of handout from the Fed than American banks. According to Nancy Pelosi, this shouldn't have happened.