Foreign institutions were the biggest borrowers from the Fed during the financial crisis

New disclosures that come out of a recent Freedom of Information Act ruling shows that during the height of the financial crisis the Fed lent billions of dollars to foreign institutions.

The data shows that the Fed's discount window was accessed heavily during the Lehman crisis back in October 2008 and through the spring of last year. Two of the biggest borrowers were the European bank, Dexia SA, which took $26.5 billion in a single day and Depfa, a subsidiary of German Hypo Real Estate Group. They borrowed $24.6 billion.

Curiously, some of the most troubled US institutions hardly made any use of the discount window at all. Citigroup, for example, only took a total of $3.85 billion.

By supplying this HUGE dollar liquidity the Fed precluded what would have been a gigantic dollar spike. It was something that I was screaming about at the time, here, here, here, here and here.

If the Fed hadn't done this then the ECB and other central banks would have had to sell their currencies and buy dollars in the forex market in order to meet local institutions' liquidity needs. Instead, the Fed just basically gave them the dollars and exposed itself to unlimited foreign exchange risk. Where was the outrage back then? There was none.