As required by the Dodd-Frank Act, the GAO issued a report (the “Report”) on the FRB’s emergency lending practices under Section 13(3) of the Federal Reserve Act during the recent economic crisis (and specifically between December 1, 2007 and July 21, 2010) (the “Economic Crisis Period”). During the Economic Crisis Period, the FRB made more than $1 trillion in emergency loans. The GAO reviewed, among other things, the FRB’s criteria for extending emergency credit, its use, selection and payment of vendors, management of conflicts of interest, policies to secure loan repayment and treatment of program participants during the Economic Crisis Period. The Report concludes that in using its emergency lending powers during the Economic Crisis Period, the FRB complied with the requirements of its existing policies, but the FRB’s policies and procedures, said the GAO, should be enhanced to address the FRB’s expanded role during an economic crisis, loan requests from non-traditional borrowers and the resulting need for tightened internal controls.
Alert July 26, 2011