Fed Ends Emergency Bank Lending Program
In international trading, world markets were largely up as well. Markets surged across the board in Asia, with all major indices ending the day in the black. Hong Kong’s Hang Seng jumped by 385 points. The Nikkei in Tokyo ended the day up 268 points. In Australia, the ASX added 94 points.
Fed Ends Emergency Bank Lending ProgramA few of the programs put in place during the financial meltdown of 2008 were ended today. Most notably, the Fed called to a close the program responsible for ‘too big to fail’ emergency bank lending. This change puts to an end the days of casual bank borrowing from the Fed, although their prime interest rate continues to be 0%.
The ending of the program came as a provision of the Dodd-Frank bill of 2010. The bill put in place a series of changes to the financial marketplace. Although the bill was controversial at the time, most analysts agree that ending emergency lending to banks is not a bad thing. It has been over 2 years since a new bank has taken advantage of the program.
If this rule was in place during the crisis of 2008, though, it would have prevented the Fed from acting to bail out AIG (AIG) and other massive lending and insurance groups. However, not everyone thinks that ending the emergency lending program goes far enough. Elizabeth Warren, a Democratic Senator, told reporters earlier, “There are still loopholes that the Fed could exploit to provide another back-door bailout to giant financial institutions.”
The new rules in place would, in fact, still allow for continued bailouts if necessary. The Fed is now allowed to judge, by its own criteria, which banks and financial institutions would qualify for emergency loans. The idea is that the Fed can still lend emergency money to banks, although the new rules stipulate that the financial institutions would have to be able to pay the loans back.
Published on Dec 1, 2015By Aaron Phillips