The discount window functions as a lifesaver through which qualifying borrowers can secure emergency liquidity during times of severe stress. Historically the Fed had kept the names of borrowers confidential on the grounds that disclosure could stigmatize them in the public’s eyes, even though it was the public’s money the Fed was lending.
As it turns out, the information about Morgan Stanley (MS)’s $3.5 billion discount-window loan has been sitting on the Financial Crisis Inquiry Commission’s website since last month. The panel didn’t mention it in its final report. And nobody had written a story about it before. So there: Now it can be told.
You can see the raw data by clicking here. The link takes you to a Morgan Stanley spreadsheet showing the company’s day- to-day liquidity changes during a two-week period in September 2008 when the New York-based bank was fighting for survival. (You may need to magnify the pages 400 percent to see all the numbers.)
‘Confidential’
The loan came three days after Morgan Stanley said it had received Fed approval to become a bank holding company, giving it access to the discount window for the first time.
A Morgan Stanley spokesman, Mark Lake, confirmed that my reading of the spreadsheet is correct. The bank had stamped the document “confidential treatment requested” when it handed it over to the crisis commission. The panel released it anyway, apparently seeing no harm.
The Fed’s arguments for keeping this sort of data secret were transparently bogus. One Fed economist, Brian Madigan, said in an affidavit that disclosing discount-window borrowers’ names “can quickly place an institution in a weakened condition vis- a-vis its competitors by causing a loss of public confidence in the institution, a sudden outflow of deposits (a ‘run’), a loss of confidence by market analysts, a drop in the institution’s stock price, and a withdrawal of market sources of liquidity.”
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