WASHINGTON — Federal Reserve Chairman Ben Bernanke shot back in unusually strong terms at news reports that the Fed said made “egregious errors” about the size and impact on Americans of the central bank’s emergency lending during the 2008 financial crisis.
In a letter to the Senate Banking Committee, Bernanke released a staff memo that rebuts the portrayals in reports by Bloomberg Markets Magazine and other media that the Fed aimed to help the profits of big banks at the expense of taxpayers.
The article, released Nov. 27, said big banks reaped about $13 billion in income after the Fed committed $7.7 trillion in funds by March 2009 to rescuing the financial system.
Calling the lending numbers in the media “wildly inaccurate,” the Fed said total credit outstanding under its liquidity programs was never more than the $1.5 trillion reached in December 2008.
“To be sure, that is a very large amount, but it was necessary to ensure that the crucial mistake made during the Great Depression — failing to prevent the collapse of the financial system — was not repeated,” the Fed said.
The misleading estimates could be based on several mistakes, including double-counting some loans, the Fed said. Because much of the emergency lending was revolving and made either overnight or for short durations of up to three months, such double-counting can lead to a “gross overestimate of the actual amount of lending.”
The Fed said that nearly all of the emergency assistance has been fully repaid or is on track to be, something it said wasn’t stressed in news articles. The central bank claimed that the loans benefited U.S. taxpayers by generating about $20 billion in interest income for the U.S. Treasury.
