Fed and other Central banks intervened on junk loans of World Bank that even include grants to some European countries. Fed has resorted to favoring the undeserving organizations in 2008 and now came under scanner. In 2008, Fed gave $1.2 trillion loans to some US and foreign financial institutions and did not disclose about this to anyone.
Institutions that received cash at below market rates could earn $13 billion in income from banks. These are the same banks that in-spite of having been funded refused to grant loans to small businesses. The bankers lobbied against government regulations though such moves was supported by Fed as it never disclosed details of rescue to lawmakers. Congress kept on doling out more cash and debated on rules so as to prevent the next collapse.
Fed’s Chairman, Ben Bernanke, just disclosed that only sound institutions received emergency loans. Although internal documents revealed that big borrowers like ‘Citigroup’ has been termed marginal. So, Fed’s program meant that sound institutions could pay back TARP loans quickly.
Some banks insist that they took the loan to set an example and motivate others to borrow from Government. JP Morgan’s CEO Jamie Dimon says that it took loans from Fed in response of a request from Federal Reserve to motivate others.
This article was submitted by Raj Tulshan, Director of Business Development of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to email@example.com