Arab Banking Corp., a lender partially owned by the Central Bank of Libya, borrowed money from the Federal Reserve on 73 separate occasions in the 18 months following the bankruptcy of Lehman Brothers in 2008.
News of the Fed loans to Libya emerged as the U.S. central bank released – after much opposition and idle threats of impending financial doom – documents that disclosed the names of financial institutions that borrowed from the Fed’s discount window during the financial crisis.
According to the Fed documents, Arab Banking Corp. (ABC), then 29%-owned by the Libyan state, had total borrowings in that period of $35 billion. The Federal Reserve noted that all the discount window loans made during the financial crisis were repaid with interest.
It is quite ironic how a true story such as this emerged on April Fool’s Day, particularly as the U.S. continues to participate in air strikes against Libya and Muammar Qaddafi.
According to the U.S. Treasury Department, ABC received an exemption that permits the bank to continue operating while prohibiting it from being involved in any transactions with the government of Libya.
Senator Bernard Sanders of Vermont, an independent who caucuses with Democrats, wrote in a letter to Fed and U.S. officials including Ben Bernanke and Tim Geithner that “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 went on to say in the letter that “It is today escaping the economic sanctions imposed to hobble Muammar Qaddafi’s brutal regime. Why would the U.S. government exempt the Arab Banking Corporation from economic sanctions when it is primarily owned by the Central Bank of Libya?”
A spokesman for the New York Fed declined to comment on these developments.