Wall Street was a heavy user of the Federal Reserve's
extraordinary credit facilities during the financial crisis, Fed
data released Wednesday showed.
Goldman Sachs Group Inc. (GS), for instance, tapped the Fed's
Primary Dealer Credit Facility 84 times. Morgan Stanley (MS)
borrowed from the facility 212 times between March 2008 and March
2009, an indication of how close Wall Street's second-largest
investment bank came to the brink of collapse.
The Fed created the Primary Dealer Credit Facility, or PDCF, to
provide discount-window loans to investment banks, a privilege
previously reserved for more tightly regulated commercial banks.
Eventually, both Goldman Sachs and Morgan Stanley were granted
bank-holding company status.
Commercial banks also were big users of the facilities, often
through their investment-banking arms.
"Historically, those that hit the discount window didn't come
back. It's interesting that a lot of these brokers [that borrowed
from the facility] are still around today. It has less of a
stigma," said Sandler O'Neill + Partners analyst Jeff Harte.
Citigroup Inc. (C) used the PDCF almost daily through its
investment-banking unit, borrowing as much as $17.9 billion in late
November 2008, around the time the government stepped in to prevent
Citi's cardiac arrest. The use tapered off in April 2009.
Bank of America Corp. (BAC) used the PDCF nearly every trading
day from Sept. 18, 2008, to May 12, 2009, more than 1,000 times in
total. The bank's single biggest use of the facility was for $11
billion in October 2008.
From the PDCF, J.P. Morgan Chase & Co. (JPM) appeared to use
the funding as a parent company far fewer times than rivals, only
using it once in September 2008 and twice in October 2008. However,
Bear Stearns & Co. used the facility almost daily from April
2008 to late June 2008, after J.P. Morgan had bought the collapsing
investment bank in March of that year.
Spokesmen for several banks said the program helped the U.S.
financial system. Goldman spokesman Michael DuVally said, "In late
2008, many of the U.S. funding markets were clearly broken. The Fed
took essential steps to fix these markets and its actions were very
successful."
A Morgan Stanley spokesman also said, "the loans, which were
fully collateralized to the requirements of each Fed facility, were
fully repaid."
Citigroup said, "Citi's usage of these programs was appropriate
at the time."
Bank of America spokesman Robert Stickler said, "We have repaid,
with interest, all of the borrowings except some of those whose
terms have not expired."
Foreign Banks
Foreign banks also appear on the list of those using the PDCF
multiple times, including Barclays PLC (BCS, BARC.LN), BNP Paribas
(BNPQY, BNP.FR), Mizuho Financial Group Inc.'s (MFG, 8411.TO) U.S.
securities unit, and UBS AG (UBS, UBSN.VX).
Among those using it only once were Deutsche Bank AG (DB,
DBK.XE), Daiwa Securities Co.'s (DSEEY, 8601.TO) Daiwa Securities
America, and Commerzbank AG's (CRZBY, CBK.XE) Dresdner
Kleinwort.
Among the banks that acted as primary dealers in 2008, HSBC
Holdings PLC (HBC, HSBA.LN) doesn't appear on the list of those
that used the facility.
Primary dealers trade U.S. government securities with the Fed
and basically act as a global distribution network for Treasury
securities.
Other Lending Programs
The Federal Reserve in December 2007 began announcing a series
of emergency programs aimed at easing a severe credit crunch. The
Term Auction Facility, or TAF, for instance, allowed banks to bid
for loans without the stigma associated with the Fed's discount
window.
Citi accessed TAF through its two banking charters 26 times
between January 2008 and July 2009; its largest TAF loan was $15
billion.
Bank of America tapped TAF 15 times from October 2008 to May
2009. The first time it took $2.2 billion in September 2008 and
every other time the loan was for $15 billion.
J.P. Morgan used the TAF seven times, with the largest loan
being $15 billion in February 2009. Chief Executive Jamie Dimon had
told investors in 2009 that the bank used TAF "at the request of
the Federal Reserve to help motivate others to use the system."
Another facility, the Term Securities Lending Facility, or TSLF,
loaned up to $200 billion in Treasury securities to investment
banks for 28-day periods.
Citigroup used the TSLF 65 times, and its largest single
borrowing under that program was for $10 billion, in May 2009. J.P.
Morgan used the TSLF 23 times, never taking more than $5 billion at
a time.
Bank of America used the TSLF 23 times, with the high-water mark
an $8.75 billion loan. Morgan Stanley also used the TSLF 34 program
times and its largest single loan was $10 billion.
Shares of large banks were up in afternoon trading Wednesday
amid a generally buoyant market. Shares of Citigroup were up 2.5%
to $4.30, J.P. Morgan rose 1.8% to $38.09, Goldman Sachs shares
were up 1.6% to $158.73 and Morgan Stanley rose 1.8% to $24.91.
-By Liz Moyer, Brett Philbin, Dave Benoit and Matthias Rieker,
Dow Jones Newswires; 212-416-2512; liz.moyer@dowjones.com
--Maya Jackson Randall contributed to this article.
Mizuho Financial (NYSE:MFG)
Historical Stock Chart
From May 2024 to Jun 2024
Mizuho Financial (NYSE:MFG)
Historical Stock Chart
From Jun 2023 to Jun 2024
