Report: Fed loaned $1.2 trillion to banks during financial crisis

One of the Federal Reserve’s primary roles is to be the lender of last resort to banks. It played that role to the tune of stunning $1.2 trillion during the financial-system crisis that began in 2007, according to data compiled for the first time by Bloomberg News.

The Bloomberg probe of the Fed’s lending, published Sunday, showed that Morgan Stanley, Citigroup and Bank of America were the single largest borrowers from the central bank from August 2007 to April 2010.

The Fed also lent heavily to foreign banks that were struggling to fund themselves: Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms, Bloomberg said. They included Royal Bank of Scotland, Switzerland’s UBS and Belgium’s Dexia.

The Fed, under Chairman Ben S. Bernanke, initially refused to disclose which banks had sought financial help during the crisis, asserting that publishing the information could trigger a run on the institutions by branding them as troubled.

But the Fed lost that argument in the courts after Bloomberg sued to force disclosure.

Bloomberg notes that the Fed has said it had “no credit losses” on any of the emergency lending programs, and that an internal Fed report in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 to December 2009.

“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” James Clouse, deputy director of the Fed’s division of monetary affairs in Washington, told Bloomberg. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.”

Still, the Fed’s ability to lend in secret meant that bank shareholders weren’t privy to the full story about their companies’ funding troubles, Bloomberg notes.

“Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness,” Bloomberg reporters Bradley Keoun and Phil Kuntz wrote.

There also are some interesting details about the kind of collateral banks put up for their Fed loans. From Bloomberg:

As the crisis deepened, the Fed relaxed its standards for acceptable collateral. Typically, the central bank accepts only bonds with the highest credit grades, such as U.S. Treasuries. By late 2008, it was accepting “junk” bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation.

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25% of the collateral was foreign-denominated.

-- Tom Petruno

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Banks easing lending standards for non-real-estate loans

Divided Fed says likely to keep short-term rates near zero through mid-2013

Photo: The Federal Reserve's headquarters in Washington. Credit: Karen Bleier / AFP / Getty Images

Pebble Beach Concours: Cadillac looks into the future

 

 

 

 

 

Clearly besotted with the motoring romance of the days of yore, Cadillac has pulled the wraps off a far-flung concept car called the Ciel at Pebble Beach’s Concours d’Elegance.

Pebble Beach Concours: Lexus unveils the 2013 GS 350

Review: Sorry, VW, but Hyundai Accent is 'the people's car.'

Convertible sales slip as car buyers opt for more glass

Photos: Above, the Cadillac Ciel concept at Pebble Beach Concours d'Elegance. Credit: David Undercoffler / Los Angeles Times

Below: Cadillac Ciel concept. Credit: General Motors

 

Grocery union vote backs strike at Ralphs, Vons and Albertsons

Members of a union that represents 62,000 grocery workers at Vons, Ralphs and Albertsons supermarkets in Southern California voted overwhelmingly to authorize a strike if an agreement on a new contract can't be reached.

The strike authorization won the backing of more than 90% of the United Food and Commercial Workers members who voted, easily more than the two-thirds majority required, the union said.

The union said it would report the vote results Monday to a federal mediator trying to resolve the contract dispute.

Since the latest contract governing wages, healthcare benefits, and workplace rules expired in March. union and management negotiators have met more than 53 times. Healthcare benefits are a major area of contention.

Both sides said they would like to avoid a repeat of a four-and-a-half-month strike and lockout in 2003.

"We don’t want to strike," said Rick Icaza, president of the union's Local 770, the biggest of seven locals representing workers who would covered by a new contract. "We want to get back to work taking care of customers and our families. But the corporate owners of the supermarkets refuse to negotiate fairly to reach a compromise."

In a statement, Ralphs spokeswoman Kendra M. Doyel called the strike authorization a commonly used negotiating tactic and said it did not necessarily mean a strike would be called.

"Ralphs, Vons and Albertsons remain committed to reaching a contract that is good for our employees and keeps these union jobs sustainable for the future." Doyel said.

Daymond Rice, a Vons spokesman, said the negotiations "have not fully run their course. The employers intend to stay focused and engaged in the bargaining process. We remain hopeful that we can peacefully reach a settlement that works for both sides."

RELATED:

Tensions mount as Southern California grocery workers protest outside employers' offices

Strike could be near for Ralphs, Vons and Albertsons workers, union warns

Mediator called into grocery labor talks

-- W.J. Hennigan

twitter.com/wjhenn

Photo: A supermarket worker casts her ballot Friday in Harbor City in a vote that authorized a strike against Ralphs, Vons and Albertsons in Southern California. Credit: Rick Loomis / Los Angeles Times

Identity theft, fake gems: Your weekly ScamWatch

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Afghanistan gems –- Military personnel in Afghanistan have been falling victim to local merchants selling fake gems they claim can be resold in the United States for huge profits, the Better Business Bureau said in a news release. Janice Zerbe, who owns a jewelry store in Colorado Springs, Colo., said members of the military have come to her store to sell stones purchased overseas. "Unfortunately, the majority of the stones are fake, and even those that are authentic are not cut correctly, or are downright unattractive,” Zerbe said. The Better Business Bureau has asked military families to alert loved ones to avoid buying gems from merchants in Afghanistan unless they have good references.

Sweepstakes –- Thousands of Americans have been victimized by a long-running scam in which they are told by email or telephone that they’ve won a lottery or sweepstakes prize and need to pay the taxes upfront before they can receive their prizes, the Better Business Bureau said. Recently, a disabled maintenance worker from Florissant, Mo., said thieves tricked her into giving them $3,000 after they told her she won two multimillion-dollar sweepstakes prizes.  “All of us dream about winning the lottery or a sweepstakes prize,” the bureau’s Michelle Corey said. “But in the vast majority of cases, these prize notifications are nothing more than attempts to steal money from unsuspecting consumers.”

Identity theft –- The Los Angeles County district attorney’s office has advice to help avoid becoming victims of identity theft. Criminals often use strangers’ names, Social Security numbers and dates of birth to obtain credit cards in their names and run up thousands of dollars in charges. Among the DA’s suggestions: don’t give anyone a credit card number or related information over the phone unless you initiated the call or are dealing with someone you know; don’t carry your Social Security number with you; and order your credit report at least once a year to look for suspicious activity. For more recommendations from the district attorney, click here.

RELATED:

Gold jewelry, foreign currency: Your weekly ScamWatch

Internet fraud: Your weekly ScamWatch

Soaring gold prices lead to jewelry robberies, police warnings

-- Stuart Pfeifer

Pebble Beach Concours: Lexus unveils 2013 GS 350

Lexus decided to use this year’s Pebble Beach Concours d’Elegance to unveil to the world their 2013 GS 350 sedan. Yet the automotive glamour of the event and rich heritage (and potential price tags for the auctions taking place during the weeklong event) seemed to overwhelm Lexus’ latest.

Though the new GS ostensibly draws a few design influences from the Lexus LF-Gh concept seen at the 2011 New York Auto Show, the car could have used a few more. The front bears a strong resemblance to the CT 200h, with a few more angles protruding out. On the one hand it’s a mundane design that’s not trying hard enough, and at the same time the cacophony of converging shapes is trying entirely too hard.

The back looks strikingly similar to a Hyundai Sonata, which isn’t necessariliy a bad thing. Though if you agree you might want to keep that little morsel to yourself as it's probably not a comparison that potential GS buyers will want to hear.

This is the fourth generation of the GS line, and it has traditionally competed against other midsize luxury sedans such as the Mercedes E-Class, BMW 5 series and Infiniti M. Therefore, the initial powerplant is a 3.5-liter V-6 with direct injection. Lexus says it puts out 306 horsepower and 277 pound-feet of torque.

Shifting duties are handled by a six-speed automatic transmission with paddle shifters and will route power to either the rear wheels or all four wheels, if equipped.  

The interior of the GS is a highlight. Recessed deep into the top-of-the-center console is a massive, 12.3-inch, high-resolution viewing screen, which the company says will be standard across all trim lines. The screen’s duties can be split simultaneously between, say, the navigation system for the driver and the stereo system.

Meanwhile, the comfortable seats are thickly bolstered and the construction of the cabin is first rate.

Lexus didn’t announce pricing figures for the GS, but said it would go on sale in early 2012. Stay tuned for a full review in the near future.

ALSO:

Review: Sorry, VW, but Hyundai Accent is 'the people's car.'

Convertible sales slip as car buyers opt for more glass

Photos: Above, the 2013 Lexus GS 350. Credit: David Undercoffler / Los Angeles Times. Below, the Lexus GS 350 at Pebble Beach. Credit: Lexus.

Retail Roundup: Barnes & Noble, Target, Lady Gaga and Barneys

-- Liberty Media has dropped its plan to buy Barnes & Noble and instead has invested $204 million in the bookstore chain. Under the terms of the deal, Liberty purchased preferred stock, convertible into about 12 million shares or 16.6% of the company's common stock at a price of $17 a share. 

The investment was approved by Barnes & Noble's board of directors following a recommendation and closed Thursday. 

-- Target will relaunch its website next week, an overhaul more than two years in the making. The move is intended to drive more sales to the discount giant's website and make the Internet shopping experience more similar to its in-store experience. As part of the relaunch, Target will bring its online operations in-house; it had previously outsourced much of its Web operations.

-- Sure it's still summertime, but it's never too early to begin thinking about the holidays. This week Barneys New York announced that it would be partnering with Lady Gaga for a holiday campaign called "Gaga's Workshop." Our friends over in The Times' Image section say the pop star will design a limited edition collection of small gift items that will be available at all Barneys locations nationwide and online; there will also be a Gaga-inspired window display at the retailer's New York store.

-- Andrea Chang

Podcast: Eurobonds, Star Analysts and Productivity

Financial markets have been showing more signs of stress. The daily swings of stock markets have been growing wider, and investments presumed to be safe, like Treasury bonds and gold bullion, have been rising sharply in price.

While these market movements are global, many of the problems over the last week emanate from Europe. In the new Weekend Business podcast, Graham Bowley and Floyd Norris discuss proposals to create eurobonds as a way to provide financing for troubled members of the European Union. Political opposition in relatively rich countries like Germany, however, makes such bonds unlikely in the near future. Meanwhile, banks in Europe and elsewhere retain considerable exposure to European sovereign debt. No simple solution is at hand, and the markets remain skittish.

In a separate conversation in the podcast, and in an article on the cover of Sunday Business, Susanne Craig says that despite the uncertain market outlook, a bidding war has developed for stock analysts specializing in Internet and social media companies. We haven’t returned to the manic mood of the late 1990s, she says, but the sums being paid to some stock analysts may suggest that we are heading in that direction.

Tyler Cowen, the George Mason University economist, explores the implications of declining labor productivity in his Economic View column in Sunday Business, and in a podcast conversation. This may be the most serious of the many economic problems facing the United States, he says.

Feeling blue about the economy and the markets? Paul Lim, who writes the Fundamentally column for Sunday Business, says in the podcast that he sees a silver lining for stocks. While big American companies have not been hiring in large numbers, they have begun spending in two ways — on tangible things like technology and on acquisitions of other companies. Both should bolster share prices.

The news section of the podcast includes a discussion of Google’s plans to acquire Motorola Mobility.

You can find specific segments of the podcast at these junctures: Europe’s troubles (32:13); news roundup (21:33); star analysts (18:38); Tyler Cowen on productivity (11:51); Paul Lim on stocks (6:30); the week ahead (2:08).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.