GE,JPMorgan got US Fed help in 2008: Records

Newly disclosed records show that during the 2008 financial crisis.

Newly disclosed records show that during the 2008 financial crisis,the Federal Reserve essentially lent 16.1 billion to General Electric by buying short-term corporate IOUs from the company at a time when the public market for such debt had nearly frozen.

And on September 15,2008,the day Lehman Brothers filed for bankruptcy protection,JPMorgan Chase received a 3 billion loan from the Fed. The loan was extended under one of several Fed programmes tapped by the Wall Street bank,one of the more robust financial institutions to weather the crisis.

The two companies received help even as their chief executives,Jeffrey R Immelt of GE and Jamie Dimon of JPMorgan,sat on the nine-member board of the Federal Reserve Bank of New York.

Neither executive was involved in creating the emergency programmes,which were approved by the Feds board of governors in Washington. Both companies also disclosed that they were among scores of institutions that received support from the Fed. Nevertheless,some policy experts expressed discomfort with the situation.

In my view,it is an obvious conflict of interest for CEOs of banks and large corporations who serve on the Feds board of directors to have received cheap loans from the Fed, US senator Bernard Sanders said.

While they got a huge amount of government support,small businesses are going bankrupt because they cant receive affordable credit,workers are losing their homes to foreclosure,and consumers are being charged 25 per cent to 30 per cent interest rates on their credit cards by the very same banks that were bailed out, he added. The details of the emergency loan programme were disclosed last week when the Fed reluctantly released records of 21,000 crisis-related transactions under orders from Congress. The disclosures are likely to renew questions about the influence of bank officers and corporate executives in the operations of the Fed.

Its ugly, said Allan H Meltzer,an economist at Carnegie Mellon University and a historian of the Fed. It has the appearance of impropriety.

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The Dodd-Frank Act,which President Obama signed in July,bars representatives of banks that are members of the Fed system,like Dimon,from having a vote in selecting the presidents of the Feds 12 district banks,altering a system that went back to the creation of the Fed in 1913.SEWELL CHAN amp; JO CRAVEN McGINTY