Is the Fed Propping Up Wall Street?

Buried in the financial news today was this startling tidbit:

Reuters
Investment banks are borrowing from Fed
Wednesday March 19, 12:12 pm ET

NEW YORK (Reuters) - Investment banks Goldman Sachs Group Inc (NYSE:GS - News), Lehman Brothers Holdings Inc (NYSE:LEH - News) and Morgan Stanley (NYSE:MS - News) are testing a new program that allows investment banks to borrow directly from the Federal Reserve, according to people at the banks.

My first thought: how do I get my own private access to this Federal ATM?

The story continues:

In a bid to stabilize jittery markets, the Fed said on Sunday that it would allow investment banks to borrow from its discount window using a wide range of investment-grade securities as collateral.

(snip)

The Fed has also cut the rate at which dealers borrow at the discount window to 2.5 percent from 3.5 percent, in two separate actions this week.

Goldman Sachs plans to test the program sometime this week, a spokesman said. Morgan Stanley Chief Financial Officer Colm Kelleher said his bank has already tested the program, and a spokeswoman for Lehman said the investment bank has also done so.

Erin Callan, CFO at Lehman Brothers Holdings Inc (NYSE:LEH - News), said in a conference call on Tuesday that dealers can borrow from the discount window at attractive terms.

"We would expect that the dealer community will actively begin to access the new program," Callan said. The program is a statement of confidence to parties that trade with and finance Lehman, and will also allow Lehman to fund more business with clients, she added.

In August, when commercial paper markets were seizing up, the Fed cut the discount rate for commercial banks. Soon after that, the four largest U.S. banks and a major international bank borrowed more than $2 billion total at the discount window, to help remove the stigma of getting short-term financing from the central bank.

That was nice of them. Wouldn't want anyone on Wall Street to have to earn their money.

Yes folks, that's your tax dollars at work, propping up investment banks some of which (like Lehman Bros.) are rumored to be in as dire straits as Bear Stearns was before it was sold for peanuts to JPM.

After Monday's scare, the Fed (and God knows what related shadow outfits) appear to have gone into full damage-control mode:

Markets Brief
Visa Debuts Public Trading In Unsteady Climate
Camilla Webster, 03.19.08, 9:19 AM ET

A Fed rate cut, a 400-point gain on the Dow, the largest IPO in U.S. history and strong earnings from the battered financial sector could have investors ready to snap up a basket of stocks this Easter week. But some traders surmise that Tuesday was a one-day rally party.

Now the VISA IPO struck me as really weird timing, to put it mildly: why would a company, a CREDIT card company of all things, choose to go public the day after one of the most wild rides in recent market history? Would not their execs have chosen to delay the IPO for fear of debuting during a crash or substantial fall?
Who tipped them off that the markets would stabalize less than 24 hours after the chaos on Monday? Either way, is it not an amazing PR coup for Wall Street that its largest IPO ever occurred in such a climate? Sure makes me wonder what back room deals were being struck to make it all happen without a hitch. Just saying.

Meanwhile, now that the nation's biggest investment banks are feeding at the trough of the Federal Reserve, and now that billions upon billions has been siphoned off into war profiteering contractors and companies in Iraq, can we call American now for what it so obviously is: a corporate welfare state? Just saying.