MN Banks Borrowed From Fed During Financial Crisis

U.S. Bancorp, TCF Financial Corporation, Home Federal Savings Bank of Rochester, Stearns Bank of St. Cloud, and Highland Bank of St. Michael are among the Minnesota banks that tapped the Federal Reserve's discount window during the financial crisis.

More than a dozen banks in Minnesota borrowed heavily from the Federal Reserve during the worst part of the financial crisis.

Those banks include U.S. Bancorp of Minneapolis, TCF Financial Corporation of Wayzata, Home Federal Savings Bank of Rochester, Stearns Bank of St. Cloud, and Highland Bank of St. Michael, according to federal government data made available Thursday.

The Fed historically hasn't revealed the identities of banks that have borrowed from its discount window-traditionally a last-resort lender-since the window began in 1914, arguing that disclosure would make banks less likely to use the window in the future and thus hinder its ability to ease a future liquidity crisis.

But a federal judge ordered the central bank to release the data after Bloomberg News and Fox News sued for it.

The data isn't available electronically, so it takes several days to receive by mail, but various media reports have confirmed that:

¥ U.S. Bancorp tapped the discount window 21 times in 2008-including a $3.4 billion overnight loan on September 10, 2008.

¥ TCF borrowed $290 million between February 2008 and early 2009.

¥ Home Federal Savings Bank of Rochester used the discount window 30 times, borrowing $684 million in short-term loans, between February 2008 and March 2009.

¥ Stearns Bank of St. Cloud tapped the window more than 100 times during the financial crisis, borrowing $1.5 billion in short-term loans, which made it the most frequent user of the discount window among Minnesota banks.

Among all U.S. banks, lending through the discount window climbed to a peak of $111 billion on October 29, 2008, as credit markets froze due to the Lehman Brothers bankruptcy, according to the Star Tribune.

When subprime mortgage defaults caused widespread panic, the Fed tried to eliminate a stigma associated with borrowing from the discount window and encouraged banks to use it. The central bank cut the discount rate it charged for the loans from 5.75 percent to 0.5 percent by the end of 2008 and extended the terms of the loans to up to 90 days.

“We used [the discount window] because it was the best economic funding mechanism available to us,” U.S. Bancorp Chief Financial Officer Andrew Cecere told the Star Tribune. “This was done in consultation with the Fed. There was no stigma.”

Meanwhile, Al Mannino, vice president of corporate affairs at Home Federal Savings Bank of Rochester, told the Minneapolis newspaper that “it would be unfair to imply that utilization of the funds when rates are attractive is anything other than a prudent business decision,” adding that “we always shop for the best available rate.”