Why a Foreign Bank Feasted on Fed Funds

The biggest recipient of funds from the Federal Reserve discount window during the financial crisis was a European bank that received a total of about $300 billion in loans, guarantees, and cash infusions from governments and central banks. It also owned a subsidiary implicated in a bid-rigging scheme that prosecutors say defrauded U.S. taxpayers. According to details of Fed lending released on Mar. 31, Dexia, based in Brussels and Paris, borrowed as much as $37 billion, with an average daily loan amount of $12.3 billion in the 18 months after Lehman Brothers collapsed in September 2008.

By aiding Dexia, the Fed kept money flowing into local government projects throughout the U.S. Dexia guaranteed bonds issued by entities as varied as the Texas Veterans Land Board in Austin and the Los Angeles County Metropolitan Transportation Authority. The biggest buyers of those bonds were money market mutual funds.