Libya-Owned Bank Got 73 Loans From Fed Discount Window Totaling $35 Billion At 0.25% Interest

Excerpt From Bloomberg

Arab Banking Corp., the lender part- owned by the Central Bank of Libya, used a New York branch to get 73 loans from the U.S. Federal Reserve in the 18 months after Lehman Brothers Holdings Inc. collapsed.

The bank, then 29 percent-owned by the Libyan state, had aggregate borrowings in that period of $35 billion -- while the largest single loan amount outstanding was $1.2 billion in July 2009, according to Fed data released yesterday. In October 2008, when lending to financial institutions by the central bank’s so- called discount window peaked at $111 billion, Arab Banking took repeated loans totaling more than $2 billion.

“ABC has a robust balance sheet, is amply capitalized and currently maintains a comfortable liquidity position,” the company said in an e-mailed statement. “ABC currently has no outstanding loans under any Federal Reserve, or other, emergency lending program.”

Arab Banking reported a loss of $880 million in 2008 as it took a $1.1 billion charge tied to structured investment vehicles and derivative products known as collateralized debt obligations. Arab Banking recovered during the next two years, posting profits totaling $265 million.

Libya previously shared the bank with the Abu Dhabi Investment Authority and the Kuwait Investment Authority, both sovereign investment funds. The Libyan Central Bank bought out the Abu Dhabi stake in 2010 and took majority control, which prompted Fitch Ratings in December to downgrade Arab Banking’s credit rating.

In March, after the U.S. froze Libya’s assets, Fitch downgraded the bank’s credit rating again, this time to “junk” status. Contracts to protect Arab Banking’s debt, which typically rise as investor confidence deteriorates, increased by 186 basis points to 500 during March. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

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All 25,000 files are available at the following link:

• Fed Discount Window Data Released

Bernie Sanders Letter To Bernanke: Why Did The Fed Bailout The Central Bank Of Libya?

73 discount window loans to Libya totaling $35 Billion at .25%...

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Read the Letter

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.

Flashing Blue Light Seen Above Exploded Nuclear Reactor

Bill Gross: "Treasuries Have Little Value Given Our $75 Trillion National Debt; We Are Out-Greeking The Greeks"

• Medicare, Medicaid and Social Security now account for 44% of total federal spending and are steadily rising.
• Previous Congresses (and Administrations) have relied on the assumption that we can grow our way out of this onerous debt burden.
• Unless entitlements are substantially reformed, the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates.

That adorable skunk, Pepé Le Pew, is one of my wife Sue’s favorite cartoon characters. There’s something affable, even romantic about him as he seeks to woo his female companions with a French accent and promises of a skunk bungalow and bedrooms full of little Pepés in future years. It’s easy to love a skunk – but only on the silver screen, and if in real life – at a considerable distance. I think of Congress that way. Every two or six years, they dress up in full makeup, pretending to be the change, vowing to correct what hasn’t been corrected, promising discipline as opposed to profligate overspending and undertaxation, and striving to balance the budget when all others have failed. Oooh Pepé – Mon Chéri! But don’t believe them – hold your nose instead! Oh, I kid the Congress. Perhaps they don’t have black and white stripes with bushy tails. Perhaps there’s just a stink bomb that the Congressional sergeant-at-arms sets off every time they convene and the gavel falls to signify the beginning of the “people’s business.” Perhaps. But, in all cases, citizens of America – hold your noses. You ain’t smelled nothin’ yet.

I speak, of course, to the budget deficit and Washington’s inability to recognize the intractable: 75% of the budget is non-discretionary and entitlement based. Without attacking entitlements – Medicare, Medicaid and Social Security – we are smelling $1 trillion deficits as far as the nose can sniff. Once dominated by defense spending, these three categories now account for 44% of total Federal spending and are steadily rising. As Chart 1 points out, after defense and interest payments on the national debt are excluded, remaining discretionary expenses for education, infrastructure, agriculture and housing constitute at most 25% of the 2011 fiscal year federal spending budget of $4 trillion. You could eliminate it all and still wind up with a deficit of nearly $700 billion! So come on you stinkers; enough of the Pepé Le Pew romance and promises. Entitlement spending is where the money is and you need to reform it.

Continue reading at PIMCO...

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March 11 (Bloomberg) -- Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co., discusses the outlook for the U.S.'s AAA credit rating. Gross, speaking from Newport Beach, California, with Margaret Brennan on Bloomberg Television's "InBusiness," also talks about the 8.9-magnitude earthquake that struck Japan and the Federal Reserve's quantitative easing.

Summary from Bloomberg:

Gross Echoes Buffett Saying Treasuries Have ‘Little Value’ on Debt, Dollar

Canadian Govt Refuses To Test For Radiation In Milk Claiming It's Not Ne...

John T. Williams Protest and Rally - part 4

$5 Fees May Be Coming to an ATM Near You

J.P. Morgan Chase [JPM 46.10 -0.35 (-0.75%) ] and other banks are trying to recoup approximately $30 billion a year in lost overdraft fee income by testing $5 ATM fees, Consumer Action spokesman Joe Ridout told CNBC.

Jack Hollingsworth | Getty Images

These banks have "historically been reliant on overdraft fees," he said, so they're "coming up with new ways to make up the difference." He said higher ATM fees and other rising costs penalize small depositors.

Nessa Feddis, spokeswoman with the American College of Consumer Financial Services, agreed there are "enormous pressures on banks because of lost revenue."

But she insisted that "most people don't pay ATM fees. Only non-customers who otherwise pay nothing to contribute to the cost of providing the ATMs pay the fee. That is fair because otherwise they are not contributing to the cost of providing the service."

She blamed "price controls that the government is imposing" for drastically limiting debit card interchange fees.

"Those debit card interchange fees — and you’re talking about a penny on the dollar — basically not only provide value to the merchant but they also support the cost of providing debit cards and checking accounts. Until now, we’ve been lucky with (banks offering) a lot of free accounts. I think we will see that go away."

Ridout said the banks are exchanging in political brinksmanship by using the threat of higher ATM fees to "encourage" pressure on the Federal Reserve to "tamp down what this interchange cap is going to be." The Fed issued draft interchange fee rules in December.

Ridout said no one is forcing the banks to charge higher ATM fees, and consumers have other choices if they don't want to pay them.

Crredit unions don't charge fees, he said, because they "don’t aim to turn a profit, they have not relied on overdraft fees that gouge consumers and they don’t pay their executives eight-figure salaries or multi-million-dollar bonuses and they don’t have to come up with rinky-dink fees to support these irresponsible levels of compensation."