Fed Opened Discount Window During Crisis to Foreign Banks

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This article (via Manan Shukla) describes some of the loans made by the Fed to domestic and foreign banks at the peak of the financial crisis. The Fed is the lender of last resort to banks when they do not have enough cash on hand to meet their needs. Banks get cash through customer deposits (which are really short term loans) or by borrowing money from wholesalers, like money market funds short term. Usually when they borrow short term they keep rolling over the loans as they mature. During the crisis the wholesale market froze up and many banks were unable to roll over their short term loans. In order to satisfy their need for cash they can borrow from the Fed using less liquid assets as collateral. All of these loans were paid back with interest. The extent to which the Fed extended its Discount Window to foreign banks with domestic branches in the US was not public information before it was released by the Fed under a public interest request by Bloomberg News. Some politicians have raised questions about the Fed's role in providing liquidity to foreign banks. from my perspective, this only shows how interconnected the global banking system is. Problems in one part of the world create problems in other parts of the world. There was a lot of cooperation between the central banks during the crisis. Most of it occurred as problems arose. There are few formal agreements between the banks to deal with interbank systemic problems.