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During the financial crisis the Fed made hundreds of billions of dollars available to European central banks in order to facilitate payments that needed to be made in U.S. dollars. But Bloomberg’s Bob Ivry reports that there was much more going on: the Fed was actually making direct — and very secret — loans to European banks at interest rates as low as 0.01%.

The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.

….“I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.

….Credit Suisse’s borrowing peaked at about $45 billion in September 2008….RBS’s use of ST OMO hit about $30 billion in October 2008….Frankfurt-based Deutsche Bank’s use peaked at about $20 billion in October 2008, its chart shows.

This is via Felix Salmon, who comments:

Why did the Fed set up a short-term lending program which seems to have been aimed overwhelmingly at European banks? And how does lending $45 billion to Credit Suisse support the flow of credit to U.S. households, in any but the most circuitous manner? It’s probably not worth asking the Fed these questions. But it does seem that the governments of Switzerland, Germany, France, and the UK should all be sending thank-you letters to 33 Liberty Street if they haven’t already done so: it’s entirely possible that the New York Fed bailed out their banks without those governments even knowing about it. That’s just how generous we are, in this country.

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