Tomorrow, the Federal Reserve is supposed to release information regarding a suite of programs created to increase lending during height of the financial crisis. Scheduled for release are the amounts, dates, types of loans and loan terms for every entity that took advantage of the emergency lending programs set up by the Fed. Included in that list will be the Term Asset-Backed Securities Loan Facility (TALF), the mortgage backed securities program, Maiden Lane and other programs that provided loans or assistance to financial institutions between December 1, 2007 and July 21, 2010 – the date the Dodd-Frank Wall Street Reform and Consumer Protection Act was put into law.
This information is of interest for a few reasons. If it’s fulfilled as the Dodd-Frank bill requires, we’ll know which banks had to use the secondary credit window, also known as the discount window, which was reserved for banks in poorer health. Information about TALF loans will show us which banks took advantage of federally guaranteed loans as an incentive to buy “toxic assets” and which banks were able to get rid of their bad assets as a result of the program. We’ll also find out which banks the Fed was nice enough to buy so many risky mortgage-backed securities from.
The graphic below shows when spikes in purchases occurred. It visualizes the Fed’s growth over time as it took on more and more risk to help the economy.
It seems as though the requirement inserted into the Dodd-Frank bill will satisfy the Freedom of Information act request filed by Bloomberg back in 2008. Bloomberg and many other news outlets and government watchdogs, including the Sunlight Foundation, wanted to know details about the collateral being pledged to the Fed in exchange for loans to help banks remain liquid. That FOIA was denied claiming the information was confidential commercial information and therefore did not have to be released.
The Fed claimed that releasing the information could have the effect of stigmatizing the struggling banks, thus hurting them even more. The data that is supposed to be released now, however, will be as much as two years old in some cases. Therefore the current state of banks that might have once been in trouble will still be unknown.
To learn more about the Fed’s steps to help the economy and how it strayed from its primary job of setting the interest rate, read here.
Here is the text from the Dodd-Frank bill as enacted:
“PUBLICATION OF BOARD ACTIONS.—Notwithstanding any
other provision of law, the Board of Governors shall publish on
its website, not later than December 1, 2010, with respect to all
loans and other financial assistance provided during the period
beginning on December 1, 2007 and ending on the date of enactment
of this Act under the Asset-Backed Commercial Paper Money
Market Mutual Fund Liquidity Facility, the Term Asset-Backed
Securities Loan Facility, the Primary Dealer Credit Facility, the
Commercial Paper Funding Facility, the Term Securities Lending
Facility, the Term Auction Facility, Maiden Lane, Maiden Lane
II, Maiden Lane III, the agency Mortgage-Backed Securities program,
foreign currency liquidity swap lines, and any other program
created as a result of section 13(3) of the Federal Reserve Act
(as so designated by this title)—
(1) the identity of each business, individual, entity, or foreign
central bank to which the Board of Governors or a Federal
reserve bank has provided such assistance;
(2) the type of financial assistance provided to that business,
individual, entity, or foreign central bank;
(3) the value or amount of that financial assistance;
(4) the date on which the financial assistance was provided;
(5) the specific terms of any repayment expected, including
the repayment time period, interest charges, collateral, limitations
on executive compensation or dividends, and other material
(6) the specific rationale for each such facility or program.”