Questions are being raised in the United States after Federal Reserve data showed that a Libyan-owned bank borrowed 73 times from the Fed at the height of the financial crisis.
As The Globe and Mail’s New York correspondent Joanna Slater reports today, the U.S. central bank yesterday provided 25,000 pages of documents disclosing which banks borrowed what after the collapse of Lehman Bros. in mid-September of 2008 plunged the world into an economic tailspin.
Among those pages were documents showing that Arab Banking Corp., then part-owned by Libya’s central bank, had aggregate loans of $35-billion (U.S.) in the 18-month period following the failure of Lehman.
According to Bloomberg News today, the Libyan bank took several loans totaling more than $2-billion at the Fed’s discount window, the largest being $1.2-billion.
Libya is now subject to sanctions, of course, as violence rages amid popular uprisings in the Middle East and North Africa, and billions in assets have been frozen around the world.
In a letter to Fed chairman Ben Bernanke, Treasury Secretary Timothy Geithner and another official yesterday, independent Senator Bernard Sanders raised serious questions about the move.
“It is incomprehensible to me that while credit worthy 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,” he wrote.
“To make matters worse, our assistance to this Libyan-controlled bank did not end there,” he added in the letter released publicly. “On March 4, the Treasury Department exempted from economic sanctions the Arab Banking Corp. and any other bank that is owned or controlled by the Libyan government operating under the laws of a different country.”
And here’s one more issue for the senator:
“As a result of a provision I authored in the Wall Street Reform and Consumer Protection Act, we learned that from Dec. 20, 2007 through March 11, 2010, the Federal Reserve provided over 45 emergency loans to the Arab Banking Corp. with an interest rate as low as 0.25 per cent.
"All of these loans were backed by collateral in U.S. Treasury securities purchased by the Arab Banking Corp. In other words, at the same time that the Arab Banking Corp. was borrowing money from one arm of the U.S. government at near zero interest rates, it was also lending money to the U.S. Treasury and receiving a higher interest rate.”
Also, Senator Sanders asked this question in his letter:
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?”
Good question...
No comments:
Post a Comment