In light of the U.S.'s recession and its large debt, why is the Fed loaning money to international firms?

http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html





"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, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 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 largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.


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."





My question is why is the Fed loaning out money when the U.S. is in excessive debt. I can understand if it was a good investment for the future or to help prevent another world financial collapse but isn't it bad to loan out money when the U.S. Government is in such large debt? Also, if the Fed has so much money to loan out, why didn't it loan it out during the financial collapse instead of China and other countries? Thanks!|||I do understand your point. Central bank around the world with surplus reserves are mostly prohibited by the law to invest in a risk-taking securities or businesses.


That is why they have to buy the US Treasury bill which the lowest interest payment,1% for 5year bond,but risk-free.In the crisis, people such as in South Korea and Thailand, donated gold to the central bank as a reserve, but prohibited to use it.But in the case of the FED,what it's gonna do with the money? It can buy the US Treasury bills, too, if it wanted to affect the long-term rate.It is also a mystery power that the FED can lend the money to corporations,both domestic and foreign.|||The answer is right in the article you cite.





The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank NETTED $13 billion in interest and fee income from the programs from August 2007 through December 2009.|||Lehman brothers may not, ever, be allowed to happen again . . . .to0 big to fail means: large enough to get government grants (loans) . . . .





As T.Boone Pickens once said "if you owe so much money to the bank that the bank can not afford to lose you as a customer . . . . you own the bank".|||The same reason the loaned money to large US banks.





Foreign banking institutions, which include foreign bank branches, agencies, and U.S.-chartered bank subsidiaries, hold approximately one-fourth of all commercial banking assets in the United States.


Foreign bank branches and agencies operating in the United States are subject to Federal Reserve regulations.


Federal Reserve services and privileges are available to foreign bank branches and agencies, but U.S. deposit insurance is not available to branches established after December 1991.