Federal Reserve Chairman Ben Bernanke on Tuesday pushed back against reports that the Fed had lent banks $7.77 trillion or more during the financial crisis, saying they contained "egregious errors and mistakes."
Bloomberg Markets Magazine last month published an article called "Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress."
The article was widely referenced by other news organizations, including The New York Times.
The Bloomberg article said the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system when all guarantees and lending limits were added up.
While Bernanke did not mention Bloomberg or any other news organization by name, he said in a letter to lawmakers that the figure and other estimates of larger total amounts of lending, were "wildly inaccurate." On any given day, Fed credit from its emergency liquidity programs was never more than about $1.5 trillion, he said.
"These articles ... have contained a variety of egregious errors and mistakes," Bernanke told the chairmen of the U.S. Senate Banking and House of Representatives Financial Services committees.
The Fed chair also disputed that the loans were secret or that lawmakers were kept in the dark, saying the central bank announced its emergency programs and reported information about them to Congress and the public.
"Congress was well informed of the volume of borrowing by large banks," he said.
Bernanke further took issue with the assertion that banks reaped an estimated $13 billion of income by taking advantage of the Fed's below-market rates. Firms availing themselves of credit from the central bank's programs had to pay penalty rates for emergency loans, he said.
"The rates that the Federal Reserve charged on its lending program did not provide a subsidy to borrowers," the Fed chair said.
Matthew Winkler, editor-in-chief of Bloomberg News, said in a statement: "Bloomberg stands by its reporting."
The news agency also released a lengthy point-by-point response to the Fed staff memo.
The central bank in March was ordered by a court to divulge details on lending from its regular discount window during the crisis when it lost a legal battle initiated by Bloomberg LP, the parent of Bloomberg News, and News Corp.'s Fox News Network.
The Fed had strenuously resisted providing information about discount window borrowers, arguing that banks would be unwilling to use the lending facility if their actions risked becoming public out of fear they could be seen as weak.
When the data was released in March, it showed that banks from Europe had drawn tens of billions of dollars from the U.S. central bank during the crisis.
In addition, the Fed was instructed by the new Dodd-Frank financial reform law to divulge borrowing from other lending programs it created to stabilize financial markets during the economic meltdown. A December 2010 data release revealed that major banks had been big beneficiaries from some of those programs.
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