Revealed: Fed Graphs of the Big Banks' Borrowings During the Crisis; Bonus: The Fed's $102 Trillion in Lending Since 2000

Over at EPJ Central, Robert Wenzel is all over the $80 billion so-called ST OMO Federal Reserve facility that took in dubious mortgage backed securities (MBS) in exchange for cash lent for 28 days. He writes:

Credit Suisse, Goldman Sachs and Royal Bank of Scotland each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.

No wonder Goldman was able to withstand the panic period that took Lehman Brothers down. They were being propped up by the Fed.

The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc,reports Bloomberg.

Units of 20 banks were required to bid at auctions for the cash. They incredibly paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent. For a large portion of that period, the Fed Funds rate was over 2.00% Got that? Goldman and the other banksters could borrow at 0.01% and loan out in the Fed Funds market at over 2.00%. ---all in secret.

We dug through our Mark Pittman FOIA files and found the exact document used by Bloomberg and others to estimate the borrowings. Below are the relevant graphs from one "Chart Pack of Market Monitoring Metrics.pdf". There are various snapshots of this graph series in the file, some of which were emailed to Geithner himself when he was still at the NY Fed. Most interesting is one emailed on January 30, 2009, which contains the most comprehensive collection of banks, conveniently overlaid with their CDS spreads. [Would we go so far to say the Fed simply shovels money at the big banks whenever their risk trades too high? Yes.]

We can see Goldman Sachs was borrowing heavily during December, 2008. Wonder if they were among the lucky to secure the 0.01% stop-out interest rate on December 30.

A similar series from March, 2009 (look who's listed first again):

Lending cash for MBS is nothing new to the Fed, however. Below shows the Fed's temporary open market operations (also called repos) for MBS since inception of data publication in July, 2000.

All in all, $3.057 trillion in less than a decade. And this does not include Treasury and Agency lending, which bump up the total a bit to $102.067 trillion over the same time period:

To be fair, many of these operations only have a short term date, after which the money must be repaid. Some only a day later. If we eliminate the repos of nine days and under, we still have an eyewatering $28.520 trillion in lending, with an average term of 21 days:

Are we beginning to see where all that money came from that fueled the housing boom and the commodities bull market? The only reason the trend tapers off beginning in early 2008 is because the Fed switched to permanent operations, or outright purchases of securities, which are not shown.

The single tranche open market operations (ST OMO) discussed at the top are characterized by a one day forward settlement with 28 day terms, while most temporary OMOs/repos are same day settlement, either 14 or 28 day term. The regular $15 and $20 billion ST OMOs conducted from March 2008 to December 2008 totaled $840 billion, of which about $80 billion was outstanding at any given time (which is the figure used in the articles). However, there was an addition contribution of $205 billion total same day settlement MBS repos over the same time period, typically with 14 day terms. This would add about $10 billion outstanding at any time.

One final chart to zoom in from May 2007 (when MBS lending picked up again) filtered to show only MBS repos of 14 day terms and over):

The pickups in activity correlate with well-known macro disruptions, especially the Bear Stearns melt-down timeline (and the so-called quant melt-down in August, 2007). If we were investigating the Fed's lending, we might hone in on the specifics of the Fed's repo program since inception (presumably prior to the inception of data publication in July 2007). It has largely avoided scrutiny in the wake of all the new Fed programs in the last few years, yet it was the principal tool of monetary expansion during the period that led to the greatest economic collapse since the Great Depression.

As ZeroHedge, notes it would also be nice to question Goldman Sachs COO Gary Cohn on why he perjured himself in front of Congress, falsely testifying that Goldman only once used another Fed facility, the discount window.

And, we're still wondering why Goldman CFO David Viniar and MD David Lehman testified that they knew nothing of AIG funds landing in the bank's private coffers when it is clear from internal Fed emails when this fact was known at the highest levels at the Fed.