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Tuesday, 23 August 2011

American worries on liquidity European banks justified? In aftermath of Lehman default, Dutch banks alone borrowed a total amount of $45.5 bln from the Fed. Thank you, America!

On Sunday, August 21, I wrote an article on the growing mistrust between the US Federal Reserve and the large European banks with branches in the US.

In that article, I stated that the Fed might be slightly panicking, by demanding minimal amounts of cash money to be held at the American branches of these banks. The Fed demanded maintaining these amounts, in order to prevent cash, held by the American branches, to be siphoned out to the parent companies in Europe.
However, I must admit now that the Fed might have a point after all: 

Bloomberg published on August 22nd a list of the Fed loans that large banks received during the aftermath of the Lehman crisis. The amounts on this list are staggering

The largest loan that a European bank received, was $84.5 bln for Royal Bank of Scotland. This bank, one of the three companies that took over ABN AMRO, still has large subsidiaries in The Netherlands and can therefore be considered to be partially Dutch.

For the sake of this article, I further only show the banks with a Dutch background: Fortis, Rabobank,  ING and ABN AMRO:

Fortis bank: $26.3 blnFortis Bank SA/NV, the banking unit of Brussels-based Fortis, was broken up after getting 7.2 billion euros ($10.3 billion) of capital from the governments of Belgium and Luxembourg in September 2008. It was later nationalized. Belgium sold a 75 percent stake in the bank to Paris-based BNP Paribas SA in an all-stock transaction that took seven months to complete. In a 2009 report, Fortis disclosed borrowing as much as 58.7 billion euros from the emergency liquidity lending facilities of the Belgian and Dutch central banks in October 2008. Data show Fortis Bank also tapped the U.S. Federal Reserve's discount window, taking a $7 billion overnight loan on Sept. 29, 2008, and as much as $26.3 billion in February 2009 from the Commercial Paper Funding Facility and Term Auction Facility.
Rabobank: $9.1 bln 
ING Bank: $8.6 bln 
ABN Amro: $1.5B 
Aegon Insurance NV: $248mln
These aforementioned data and the other data in Bloomberg’s overview show the unequalled amounts of loans that these non-American banks received to stay afloat. Amounts that the Dutch and European taxpayers were never aware of. What makes these American loans extra controversial is the fact that the same banks also siphoned billions of Euros out of the European taxpayers.

If these banks would have bankrupted after all, the European and American taxpayers would have been on the hook for hundreds of billions of dollars. Therefore I suggest, that instead of acting like they are on top of the world again and handing out bonuses by the billions, the banks mentioned in the article should reward the American generosity with a big ‘thank you’.

I will do so now on my own behalf: thank you, American people, for helping these (sometimes reckless) banks to stay afloat. I appreciate it very much and I know that Americans all over the country are now suffering for this decision to help the European banks.

It was surprising for me to see that there were also a number of automobile companies present on this list:

Automobile company
Borrowed amount
Ford Motor Company

I just wonder why these companies were ´too big to fail´?! Saving the banks might have been necessary, but saving Toyota and the Bayerische Motoren Werke? Anyway, these companies were saved and that has been good for unemployment in Germany and Japan. will be updated again from September 6th

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