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Fed Names Names... Sorta

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They finally did it. The Fed finally named names... sort of. The revelations come more than two years after the fact, but the Federal Reserve finally revealed -- buried in approximately 25,000 pages of secret loan documents, mind you -- the names of the financial institutions that borrowed directly from the central bank through the discount window during the financial crisis.

Those 25,000 pages must be sifted through before a full list of the financial institutions that accessed the discount window is revealed.

The central bank was forced to reveal the names of institutions after the U.S. Supreme Court rejected an appeal by the Clearing House Association LLC, essentially a group comprised of the largest banks, Bloomberg reported.

Since the discount window was first created in 1914, the Federal Reserve had never before revealed the identities of borrowers, citing market stability and the fear that, once revealed, a crisis of confidence in the borrowing institution could hasten the potential failure of the institution. After all, the discount window is perceived a bit like the payday loan center for banks, only the terms (because they are banks!) are basically one-for-one collateral for cash, and the interest rates range from 0.25% to 1.25%, well below the 200% to 900% interest rates you and I get for a short-term cash infusion to get us to payday. As the chart below shows, discount window lending peaked in October 2008 at $111 billion. And therein lies the difference: when you're borrowing billions, you're paying a quarter of a percent, borrowing hundreds, you're paying 900%.

The graphic from Bloomberg below shows the Federal Reserve's four discount window programs and how they are implemented during an economic crisis.

The full list of financial institutions that borrowed from the Fed's discount window will appear soon.
POSITION:  No positions in stocks mentioned.