Criticisms
The actions of the Federal Reserve, including the creation of the Primary Dealer Credit Facility, have expanded its balance sheet from $800 billion, consisting mainly of safe treasury bills, to over $2 trillion, consisting largely of riskier debt and mortgage-backed securities. The decision to expand the eligible collateral was criticized for further weakening the Fed's balance sheet. Also, the Fed's actions have been criticized as a power grab to become more powerful relative to other financial regulators such as the SEC and the FDIC.
Many have criticized the PDCF for lending to investment banks on the same terms as more tightly-regulated financial institutions. They argue that since the Federal Reserve is now lending directly to investment banks that these institutions, along with other private-equity firms and hedge funds, should face broader regulation.
In a hearing of the United States House Committee on Financial Services on January 13, 2009, Rep. Alan Grayson (D-Fl) pressed Federal Reserve Vice Chairman Donald Kohn about releasing the details of exactly which firms have received funds from the Federal Reserve and specifically how much. The volume of lending at the PDCF was only published in the aggregate, shielding the identity of exactly which institutions used the facility and how much they borrowed. Now data disclosing details of the loans is available on the Fed Board of Governor's site
Read more about this topic: Primary Dealer Credit Facility
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