Yesterday the four biggest banks – Citigroup, Bank of America, JPMorgan, and Wachovia each borrowed $500 million from the Federal Reserve. This happened 5 days after the central bank lowered the rate and loosened its collateral standards in an effort to put more money into the credit markets.

“Going to the discount window is like someone on the Upper East Side being seen in a Wal-Mart,” said Charles R. Geisst, a financial historian at Manhattan College. “The T-shirts may be cheap, but why would you?”
He added: “The banks are circling the wagons. Somebody’s got a problem.”

Other big banks around the world have also tapped into central banks for financing. Barclays, a British bank borrowed roughly $622 million from the Bank of England’s standing facility. Beutsche Bank has also confirmed that they have also borrowed money from the Federal Reserve’s discount window.

It has been unclear why any of the four big banks used the discount window or if any other banks had borrowed money. Banks have been reluctant to borrow from the discount window to show ‘strength’ over the years.

[via NYT]

Tags: Business, Federal Reserve, Bank of America, Citi Group, JPMorgan, Wachovia, Financing, Banks

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