Friday, November 21, 2008
Did the $600 billion in loans the Fed made to foreign Central Banks go to foreign automakers?
Congress denied our automakers a $25 billion loan despite the prospect of bankruptcy and the massive, negative, economic ramifications of that.
Yet over the past several months the Fed has lent over $600 billion to foreign central banks, including, the ECB, Bank of England, Bank of Japan, Swiss National Bank, Banco Central do Brasil, the Bank of Korea, Banco de Mexico and the Monetary Authority of Singapore.
Here's what the Fed had to say about those loans in its minutes:
"...to address the sizable demand for dollar funding in foreign jurisdictions"
What does this mean?
It means that the Fed gave over $600 billion to foreign CBs and that money will be lent to individual institutions and companies within those respective countries.
Wouldn't it be ironic, then, if some of the recipients of those dollar loans turned out to be foreign automakers like Daimler, BMW, Hundai, Mazda and even Nissan and Toyota?
Could very well be.
There is no U.S. Government regulatory oversight when it comes to how the central banks of other nations dole out OUR money.
Did Congress say anything about this? Of course not.
The most egregious thing is that the Fed did not have to do this. If foreign central banks needed to help companies within their jurisdiction that had dollar liabilities, they could have bought dollars in the open market and supplied those dollar loans directly. Our Fed didn't have to supply them. However, as a consequence of giving those dollar loans the Fed has stopped the dollar's rally. That hurts Americans.