At sweetheart rates, of course...
You wouldn't be surprised to hear the names Bank of America, JPMorgan Chase, Citigroup, and Goldman Sachs. But how about Moammar Gaddafi?
During the height of the financial crisis in the fall of 2008, as investors and firms hoarded cash, the Fed reduced its rates to kickstart lending in the broader economy. Arab Banking Corp., a $28 billion lender now 59 percent-owned by Libya's central bank, borrowed at least $3.2 billion during this time. The Fed charged it an interest rate ranging from 2.25 percent to as low as 1.25 percent on those borrowings, regular Fed data show.
AAA-rated corporations paid bondholders an average rate ranging from 5.63 percent to 6.37 percent during the same period, according to the Fed.
The Fed lends money to banks at cheaper rates than the market because it intends for those funds to be distributed throughout the economy....
These disclosures and more were buried in nearly 30,000 pages spread across almost 900 computer files that the Fed released to reporters under court order in response to lawsuits launched nearly three years ago....
more...
Bernie Sanders, who's been leading the effort to expose who the Fed has been lending money to and at what rates, is incensed:
“It is incomprehensible to me that while creditworthy small businesses in Vermont and throughout the country could not receive affordable loans, the Federal Reserve was providing tens of billions of dollars in credit to a bank that is substantially owned by the Central Bank of Libya,” says Sanders.
The senator is also asking Treasury Secretary Timothy Geithner – a long-time Fed retainer -- to explain the Arab Banking Corp. was borrowing money at almost zero interest from one arm of the government, the Fed, at the same time the Treasury Department was borrowing money at a higher interest rate.
He'd also like to know why the Libyan bank and its US branches were exempted from the sanctions that the US imposed on Libyan businesses controlled by Gaddafi and his cronies in response to the humanitarian crisis underway in that country.
Good questions, Senator Sanders. Let's hope we'll be getting some good answers to them, and soon.
Update: Here's Bernie Sanders' press release:
Why Did the Fed Bail Out the Bank of Libya?
March 31, 2011
How do Gadhafi’s Bankers Avoid U.S. Sanctions?
WASHINGTON, March 31 – Sen. Bernie Sanders (I-Vt.) today questioned why the Federal Reserve provided more than $26 billion in credit to an Arab intermediary for the Central Bank of Libya.
The total includes at least $3.2 billion in loans that the Fed was forced to make public today in addition to earlier revelations under a Sanders provision in the Wall Street reform law.
Sanders also asked why the Libyan-owned bank and two of its branches in New York, N.Y., were exempted from sanctions that the United States this month slapped on other Libyan businesses to pressure Col. Moammar Gadhafi’s government.
“It is incomprehensible to me that while creditworthy small businesses in Vermont and throughout the country could not receive affordable loans, the Federal Reserve was providing tens of billions of dollars in credit to a bank that is substantially owned by the Central Bank of Libya,” Sanders said.
In a letter to Federal Reserve Chairman Ben Bernanke and others, Sanders asked why the central bank made at least 46 emergency, low-interest loans to the Arab Banking Corp., in which the Central Bank of Libya owns a 59 percent stake.
In the same letter, Sanders asked Treasury Secretary Timothy Geithner why the Treasury Department on March 4 let the Libya-controlled bank skirt the economic sanctions against Libya.
The senator also questioned why the Bahrain-based Arab Banking Corp. is even allowed to operate branches inside United States. “Why would the U.S. government allow a bank that is predominantly owned by the Central Bank of Libya – an institution on which the U.S. has imposed strict economic sanctions –to operate two banking branches within our own borders?” Sanders asked.
The Fed transactions were made public earlier this year as a result of a Sanders provision in the Wall Street reform law that forced the U.S. central bank to reveal which financial institutions it bailed out during the financial crisis from 2007 to 2010.
In another dubious twist, the Fed loans, at interest rates as low as 0.25 percent, relied on U.S. Treasury securities as collateral. In other words, at the same time that the Arab Banking Corp. was borrowing money at almost zero interest from one arm of the government, the Fed, it was lending money at a higher interest rate to another arm of the U.S. government, the Treasury Department.