Fed Secret Loan Program Netted Billions In Profits At Big Banks

The largest government program ever to bail out banks has been a closely guarded secret — until now.

After a three-year fight, Bloomberg News obtained access to thousands of Federal Reserve documents that show which banks got Fed loans, and how much they got, starting back in 2008.

The Fed had been fighting to keep details of those loans secret, including a one-day payout to banks of $1.2 trillion in December, 2008.

Bloomberg calculated that the banks made $13 billion in income off all those loans, which came with very few strings attached.

The Fed says that taxpayers didn't lose money on the deal, but Bloomberg News reporter Bob Ivry says the secrecy surrounding the loans hid the true financial health of major banks.

"Congress didn't know about this when it defeated legislation to break up the biggest banks," Ivry told Here & Now's Sacha Pfeiffer.

Ivry said that former Senator Ted Kaufman of Delaware said the atmosphere in Congress would have been different, and there might have been a better chance of passing a bill to break up big banks.

But the legacy of the secret loan program could create what economists call a "moral hazard."

"Traders for banks who know that their profits are going to be shared only by them, but whose losses will be shared by U.S. taxpayers, might be more willing to take risks," Ivry said.