Citigroup Inc. and Bank of America Corp. 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.
Fed Chairman Ben S. Bernanke's unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages.
The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
"These are all whopping numbers," said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. "You're talking about the aristocracy of American finance going down the tubes without the federal money."
It wasn't just American finance. Almost half of the Fed's top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion. Germany's Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.
The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.
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.
The Fed has said it had "no credit losses" from the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said they netted $13 billion in interest and fee income from August 2007 through December 2009.
"Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?" U.S. Representative Walter B. Jones, a North Carolina Republican, said at a June 1 congressional hearing in Washington. "They get help when the average businessperson down in eastern North Carolina, and probably across America, they can't even go to a bank they've been banking with for 15 or 20 years and get a loan."
Fed officials had resisted releasing borrowers' identities, saying it would stigmatize banks, damaging stock prices or leading to depositor runs. Last year's Dodd-Frank Act mandated an initial round of such disclosures in December. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep some details secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.
Data gleaned from 29,346 pages of documents and from other Fed databases show for the first time how deeply the world's largest banks depended on the U.S. central bank. Even as firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.
Two weeks after the bankruptcy of Lehman Brothers Holdings Inc. in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had "strong capital and liquidity positions." Its Sept. 29, 2008, news release, touting a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Fed loans.
That day, Morgan Stanley's borrowing from the central bank peaked at $107.3 billion. The loans were the source of almost all of the firm's available cash, based on lending data and documents released more than two years later by the Financial Crisis Inquiry Commission.
Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to "fundamentally re-evaluate" the way it manages its cash. While Lake said the bank had applied "the lessons we learned from that period," he declined to specify what changes the bank had made.
The size of bank borrowings "certainly shows the Fed bailout was in many ways much larger than TARP," said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University.
TARP is the Treasury Department's Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided public capital injections to banks.