Lehman Borrowed From Secret Fed Program

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It is learnt that Lehman Brothers Holdings Inc?s brokerage borrowed as much as $ 18 billion in four separate loans from a secret program of the US Federal Reserve in June 2008. It is said (from close sources) the program which had peaked at $80 billion in loans outstanding, was known as the Fed?s single tranche open market operations (also known as SR OMO). As per the Freedom of Information Act, the central bank has now disclosed borrower names, amounts borrowed and interest rates.

In March 2008, the Lehman brokerage had tapped the ST OMO program as a funding of $5 billion in short term finance; with lower amounts at other times during the month. The agreement was by the brokerage was to pay the outstanding loans on September 18,2008; but they went into liquidation on September 19th, four days after its parent.

Sources: Bloomberg; Topix

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