According to a new disclosure by the Federal Reserve, Harley-Davidson was given a previously secret $2.3 billion bailout during the fall of 2008 and winter of 2009. We’ve previously reported that Harley borrowed nearly $1 billion in emergency operating capital from Warren Buffett at 15 percent interest during the same period and has since upped that amount to nearly $2 billion from other lenders. The disclosure of this emergency aid by the Fed gives a new indication as to just how close Harley was to the brink during the darkest days of the financial crisis and a new indication of how much American taxpayers spent to keep it open.
Photo: Harley-Davidson Archives, Copyright Harley-Davidson
The bailout provided to Harley is just a drop in the bucket of $9 trillion total emergency aid just disclosed by the fed, other recipients include everyone from the usual Wall Street suspects to McDonald’s, foreign banks and even the South Korean government.
“The American people are finally learning the incredible and jaw-dropping details of the Fed’s multitrillion-dollar bailout of Wall Street and corporate America,” stated Senator Bernard Sanders (I, Vt). “As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”
The aid took the form of the Fed purchasing large amounts of commercial paper at non-market rates in order to fund the daily activities of these corporations and organizations. Between October, 2008 and February, 2009, the Fed bought paper from Harley-Davidson 33 times for a total of $2.3 billion.
“It is hard to say what would have happened without the facility, and how its absence might have affected GE, but overall the program was extremely effective in helping stabilize the market,” a GE spokesperson told The Washington Post. GE took $16 billion in aid under this program.
“We took an enormous amount of risk with the people’s money,” the president of the Dallas Federal Reserve told The Post. “We didn’t lose a dime, and in fact we made money on every one of them.”
Senator Sanders suggests the corporations that received this aid got off easy for irresponsible financial practices and that loaning them the money hasn’t altered their practices or even created jobs. “We bailed these guys out, but the requirements placed upon them had very little positive impact on the needs of ordinary Americans,” said the Senator.
Harley-Davidson’s net income fell from a record $1,043,153 in 2006 to a $55,116 loss in 2009. During the same time period, total motorcycle shipments fell from 349,196 to 223,023. That drop in sales isn’t enough to explain why Harley needed $2.3 billion from the federal government, instead, it seems as if the company’s exposure to bad debt by Harley-Davidson Financial Services is really what led to the company’s apparent near-death.
Harley has not yet responded to our request for comment.