Why Did the Federal Reserve Bail Out the Bank of Libya? WASHINGTON, March 31 – Sen. Bernie Sanders (I-Vt.) today questioned why the Federal Reserve provided more than $26 billion in credit to the Central Bank of Libya. “It is incomprehensible to me that while creditworthy small businesses in Vermont and throughout the country could not receive affordable loans, the Federal Reserve was providing tens of billions of dollars in credit to a bank that is substantially owned by the Central Bank of Libya,” Sanders said. Sanders also asked why the Libyan-owned bank and two of its branches in New York, N.Y., were exempted from sanctions that the United States this month slapped on other Libyan businesses to pressure Col. Moammar Gadhafi’s government.
In another dubious twist, the Fed loans, at interest rates as low as 0.25 percent, relied on U.S. Treasury securities as collateral. In other words, at the same time that the Arab Banking Corp. was borrowing money at almost zero interest from one arm of the government, the Fed, it was lending money at a higher interest rate to another arm of the U.S. government, the Treasury Department.
In another dubious twist, the Fed loans, at interest rates as low as 0.25 percent, relied on U.S. Treasury securities as collateral. In other words, at the same time that the Arab Banking Corp. was borrowing money at almost zero interest from one arm of the government, the Fed, it was lending money at a higher interest rate to another arm of the U.S. government, the Treasury Department.
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