Last Friday, in what one would think would be a bombshell story headlined "Foreign Banks Tapped Fed’s Secret Lifeline Most at Crisis Peak," Bloomberg's Bradley Keoun and Craig Torres reported that foreign banks secretly and routinely tapping the Federal Reserve's "discount window" lending program, primarily in 2008 and 2009. Some specifics:
- "(The) loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya."
- Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch ..."
- "Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion."
- "...foreign banks ... (accounted) 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."
Fed Chairman Ben Bernanke fought for two years to keep the information secret after Bloomberg filed a Freedom of Information Act request in 2009. The Bloomberg report quotes Bernanke as claiming in April 2009 that disclosure "might lead market participants to infer weakness."
In the Bloomberg report, Congressman Ron Paul is quoted making a prediction that has sadly been way off the mark: