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Rep. Paul planning hearing on Fed foreign lending
WASHINGTON (Reuters) - Persistent Federal Reserve critic Representative Ron Paul plans to hold a hearing on the central bank's emergency loans to the branches of non-U.S. banks, and could ask a Fed official to testify, his spokeswoman said on Saturday.
"I was surprised and deeply disturbed ... to learn the staggering amount of money that went to foreign banks," Paul said in a statement.
"These lending activities provided no benefit to American taxpayers, the American economy, or even directly to American banks," he said.
Paul chairs the domestic monetary policy subcommittee of the House Financial Services subcommittee. While the subcommittee would not expect Chairman Ben Bernanke to respond to a call to testify, Bernanke could be asked to send a deputy, Paul spokeswoman Rachel Mills said.
"That's definitely a possibility," she told Reuters.
Data the Fed was required by courts to disclose on Thursday showed the U.S. branches of foreign-headquartered financial firms had made extensive use of the central bank's emergency lending discount window during the severe financial crisis that froze financial markets in the fall of 2008.
During that period, the Fed actively encouraged financial firms to obtain funding from an array of unusual emergency funding vehicles to prevent markets from freezing up entirely.
While making emergency loans is at the discretion of the individual regional Fed banks, the discount window is open to any firms in sound condition able to post good collateral.
Banks from Europe drew tens of billions of dollars from the Fed at the height of the crisis through the discount window, documents showed. Nine of the 12 largest borrowers from the Fed were foreign-owned firms.
A senior Fed official defended the lending on Friday.
"They're foreign-owned operations operating in the United States, working for the American people," Dallas Fed President Richard Fisher told reporters after a speech in Dallas. "Our job is to provide liquidity to keep the American economy going."
(Reporting by Mark Felsenthal; editing by Mohammad Zargham)
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