Fed Loans Money to Banks. Fish Swim, Birds Fly

While Bloomberg (which had to go through Hell to get the documents) posts the news-story as a Big Big Big Big Deal, I don't think so.

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Look, folks, here's the deal.  The Fed lends money to banks all the damn time, and usually requires collateral for the loans in the form of Treasury bills or bonds.  The transactions are called 'repurchase agreements' because the banks agree to "repo" the bonds in X days and pay Y interest for the cash.

Let's look at another humungous Fed lending day:

The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon.
That should give you a hint as to why the Fed did all that lending:  there was a crisis.  A damn BIG crisis.

Oh, by the way:

The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.

So.  We had a crisis.  The banks needed cash for a number of reasons, not least the possibility of "runs."  The Fed lent them cash.  (Dunno if it was secured.)  The banks paid back the loans with interest.

I'm still looking for a story, aside from the umpty-zillion dollar amounts.