Fed Says First Tennessee, Banco Bilbao Used Discount Window

The Federal Reserve said First Tennessee Bank and Banco Bilbao Vizcaya Argentaria SA (BBVA) were among dozens of borrowers from its discount window during the fourth quarter of 2010.

The central bank gave out hundreds of loans to banks across the country during the period, all of which were repaid, according to data the Fed released today on its website. The borrowers were predominantly small banks.

The transactions occurred more than a year into the recovery from the 18-month recession that was the longest and deepest since the Great Depression. The world’s largest economy expanded at a 2.4 percent pace in the fourth quarter of 2010 before growth stalled to a 0.1 percent rate in the next quarter.

The Fed’s release was the second of once-secret loan data as required now by the Dodd-Frank Act. The discount window is the Fed’s main tool for providing cash to banks that have temporary funding shortfalls. The loans are fully collateralized and made by the system’s 12 reserve banks.

The largest single loan was $1.02 billion that First Tennessee Bank, a subsidiary of Memphis, Tennessee-based First Horizon National Corp. (FHN), borrowed on Nov. 24, 2010 and repaid two days later.

Computer Glitches

Computer glitches at First Tennessee on Nov. 24, 2010, the day before Thanksgiving that year, prevented transactions from being cleared with the Fed, Tommy Adams, First Horizon’s treasurer, said today in a telephone interview. Because it was the day before a national holiday, the bank borrowed from the Fed’s discount window until the technical problems could be solved on the day after Thanksgiving, he said.

The Fed has three categories of loans. Primary credit is for healthy banks with short-term funding needs. Secondary credit is for troubled banks, and seasonal credit is for banks that have uneven funding flows. The Dodd-Frank Act of 2010 required disclosure of discount window loans with a two-year lag.

Two of the largest loans were to the New York branch of Banco Bilbao, Spain’s second-biggest bank. The Bilbao-based lender borrowed $100 million on both Oct. 5, 2010 and Oct. 6, 2010, repaying both loans the following day.

Paul Tobin, a Madrid-based spokesman for BBVA, said that the loans are part of a recurring test for the firm’s New York- based investment bank that occur once or twice a year. “It’s a standard operation just to test the collateral,” Tobin said. “We do it every year. It’s a symbolic amount.”

The Fed in March 2011 released discount-window loan documents for the first time after court orders upheld Freedom of Information Act requests filed by Bloomberg LP, the parent company of Bloomberg News, and News Corp.’s Fox News Network LLC. In all, the Fed released more than 29,000 pages of documents, covering the discount window and several Fed emergency-lending programs established during the crisis from August 2007 to March 2010 as a result of the FOIA requests.

To contact the reporters on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net; Caroline Salas Gage in New York at csalas1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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