RPT-Time for Fed to show who crisis loans benefited

(Repeats story filed earlier with no changes to text)

* Fed faces Dec. 1 deadline for emergency loan disclosure

* Data will show who benefited most from crisis largess

* Memories of controversial AIG, Bear bailouts still fresh

By Pedro Nicolaci da Costa

WASHINGTON, Dec 1 (BestGrowthStock) – The Federal Reserve on
Wednesday will have to disclose details about emergency loans
made during the 2007-2009 financial meltdown, including who
borrowed how much and what collateral was offered in return.

The findings, which must be revealed in accordance with a
deadline set by a wide-ranging rewrite of U.S. financial rules
enacted in July, could shed light on who benefited most from
central bank’s controversial efforts to support financial
institutions and credit markets.

The results might also reignite debate about whether some
bailouts, such as the support for insurer AIG (AIG.N: ), were
appropriate.

As the financial crisis that began in the summer of 2007
spread beyond the housing sector to the nation’s biggest banks,
the Fed, under the leadership of Chairman Ben Bernanke, devised
increasingly complex facilities to help restore confidence.

Among these were loans to broker-dealers made outside the
Fed’s usual discount lending window for troubled institutions,
which is reserved for deposit-taking commercial banks.

Investors are curious to see how much money the likes of
Goldman Sachs (GS.N: ), Morgan Stanley (MS.N: ) (Read more about the money market today. ) and Merrill Lynch,
now part of Bank of America (BAC.N: ), took from the central
bank.

“I suspect a lot of institutions might have had their hand
out,” said Kim Rupert, a managing director at Action Economics
in San Francisco. “I expect we’ll see some fairly significant
borrowings from some of the major financial institutions. It
will be interesting to see what foreign institutions were very
active.”

Other key emergency lending measures included an attempt to
revive commercial paper markets with funding from the Fed, as
well as a program aimed at securitization markets that also
tapped central bank money as an incentive for new deals.

CRYPTIC CLARITY

Arguably, the Fed’s most contentious and politically costly
decision was the rescue of insurance giant American
International Group. Criticism of the Fed grew after it emerged
that AIG executives were paying themselves multimillion dollar
bonuses.

The Fed-sponsored purchase by JPMorgan of troubled
investment firm Bear Stearns in March 2008 also drew heavy
scrutiny.

That bailout temporarily quelled market fears about
contagion, though Lehman Brothers’ failure in September of that
year touched off the most virulent phase of the crisis.

Questions linger as to why the Fed and U.S. Treasury
decided to let Lehman go after they had acted to save Bear
Stearns. The Fed has argued it could not extend a loan to
Lehman because the firm was insolvent.

Through it all, the Fed was criticized for being too close
to the banking sector, while not doing enough to support the
broader economy. In recent months the financial sector has
recovered smartly but that rebound has failed to translate into
a vigorous economic expansion.

The controversy led to efforts, eventually thwarted, to
curtail the central bank’s regulatory authority and regularly
audit its emergency lending. The one-time disclosure emerged as
a compromise.

Some analysts worry that despite the broad nature of the
data being released, it would be disclosed in such a way as to
make it difficult to make immediate sense of the information.

“My sense is they’re going to give us the disclosure in the
same grotty fashion (as before),” said Christopher Whalen,
managing director at Institutional Risk Analytics, a bank
research firm. “It’s not going to be well organized so you’ll
have to sort through it.”

RPT-Time for Fed to show who crisis loans benefited