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Citi and Morgan Stanley Borrowed Over $2 Trillion From Fed

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Citigroup Building

Citigroup and Morgan Stanley each took over $2 trillion in funds from various Federal Reserve emergency facilities, according to a report from the Government Accountability Office.

Citigroup was far and away the largest user of the emergency facilities, with over $2.5 trillion in total borrowings. Morgan Stanley took just over $2 trillion.

Merrill Lynch’s borrowings were close behind, at $1.9 trillion. Bank of America’s came in at $1.3 trillion.

No other bank’s total borrowings cross the $1 trillion mark. All told, banks borrowed more than $16 trillion from the Federal Reserve.

The GAO looked at data made public by the Fed in response to a court order. The reports were famously unfriendly to anyone trying to understand the borrowings of banks. The GAO grouped together the borrowings of parent companies with all their affiliates and subsidiaries to reach its total.

It also added together loans that were made and then rolled over into new loans. So an overnight loan under the Primary Deal Credit Facility (PDCF) of $10 million which was renewed daily for a month might count as $300 million of loans. While a one-month loan of the same size under another facility would count as just $10 million.

Citigroup, Morgan Stanley, Merrill Lynch and Bank of America were all frequent customers of the PDCF, the version of the “discount window” that the Fed opened to Wall Street broker-dealers following the deal to rescue Bear Stearns.

In other words, the sky-high totals on the GAO chart do not represent amounts that were ever outstanding. Rather they represent how often banks relied on short-term facilities for aid. This is, however, a fair representation of the level of aid the banks needed during the financial crisis.

When the loans are adjusted to account for their differing terms, the picture changes slightly. To adjust for the differing lengths of the loans, the GAO multiplied each loan amount by the number of days it was outstanding and divided this amount by the total number of days in a year.

Under this methodology, borrowing $10 million from the PDCF for 30 days would only amount to an “adjusted borrowing” of $821,918. And a $10 million 30-day loan would amount to exactly the same thing.

Citigroup still emerges as a big user of Fed aid, but Bank of America beats it out under this method. Barclays and—surprisingly—the Royal Bank of Scotland fill in the third and fourth spots. Morgan Stanley drops all the way down to the fifth spot.

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