By: Cassandra VertAug. 22nd, 2011more from Cassandra Vert

Ben S. Bernanke, chairman of the U.S. Federal Reserve

The 2007 credit crunch has been dimmed in our memory by the great 2008 crash, but at the time, it was a shock. The credit crunch was a sudden shutoff of the cash that had been flowing freely since 2003.  The suddenness of the credit contraction caught some financial institutions flatfooted.

New documents have just come to light that about this time, the Fed started quietly floating money to banks to provide liquidity and avoid a worse financial event.  The scale of this lending is startling: $1.2 trillion lent from August 2007 through April 2010 to hundreds of banks and other companies in about 25 countries around the world. Not only does this dwarf the TARP program, it means that the Fed kept the entire global economy going when it was at the abyss.

The largest borrowers were the large institutions you would expect: Morgan Stanley, Citigroup, AIG, Bank of America, and so on. Companies on the list you would not expect include Harley-Davidson, General Electric, Caterpillar, and McDonald’s.

Total money lent out was highest at the time of the crash at the end of 2008 and into the beginning of 2009. The largest borrower, Morgan Stanley, borrowed over $100 billion, or over 700% of its fall 2008 market value.

Though AIG’s balance sheet had fictional elements, particularly in its derivative financing division, it did not borrow money until the crisis was full-blown. By October 2008 it borrowed $90 billion in Fed money in addition to $70 billion in “official” government money plus another $16 billion Fed loan in early 2009.  Its market value had fallen so low in early 2009 that its Fed loans amounted to nearly 300% of its market value.

Bank of America rode a roller coaster, near the top of the market in 2006, then borrowing $91 billion from the Fed in 2008. At its lowest point, its loans were over 400% of its market value. Today it is trying to survive its own balance sheet. Another bank that is in trouble today, France’s Societe Generale, was one of the earliest borrowers. Its $17.5 billion sounds small next to other figures, but in early 2009 it had nearly 80% of its market value in loans.

The largest foreign borrower was Royal Bank of Scotland at $84.5 billion. At its peak, its loans were over 950% of its market value. Royal Bank of Scotland was followed by UBS at $77 billion and over 200% of market value.

The Fed pays its profits to the Treasury. In 2009, it paid $47.5 billion to the Treasury, and in 2010 it paid $79 billion. Before the financial crisis, its annual payments were around $25 billion.

These figures reveal a glimpse of a world we don’t know at all: the Fed. The Fed is a very secretive organization that is independent within the government and yet makes government policy. Its chairman is approved through governmental channels, yet it is not accountable to the government.

The survival of a collapsed financial system is good in the short term but also kicks our inflated-asset problems down the road. The secret loans the Fed made to companies around the world held up the global financial system and made the Treasury a good profit, but they also allowed banks to hide their troubled status, even proactively assert their strength at a time when they were seriously underwater.

These figures also tell a story that we already know: the wealthy are treated differently than the rest of us. The survival of the global monetary system helped to cushion the impact of the recession, but on the other hand, even part of that $1.2 trillion in capital would have done a lot to help small businesses and homeowners weather the worst of the recession, too.

Kudos to Bloomberg for sifting through 25,000 pages of documents