In a disclosure that is likely to lead to some uncomfortable questions the United States Federal Reserve revealed this week that it had spent vast sums of money to prop up the balance sheets of foreign banks between December 2007 and March 2010.

While the U.S. central bank said its support, extended to financial institutions during the worst of the global credit market crisis, was aimed at stabilising markets and restoring the flow of credit to American families and businesses, the fact that many of the 21,000 credit market transactions benefited institutions such as the United Kingdom?s Barclays Bank came as a surprise to most observers.

In particular the Fed?s Term Auction Facility, under which the central bank directly provided term funds to a ?broader range of counterparties and against a broader range of collateral,? was widely disbursed among the U.S.-based branches of non-U.S. banks.

Other than Barclays foreign-incorporated banks benefiting from this facility included the Britain?s Bank of Scotland, Abbey National and Lloyds TSB, Ireland?s Allied Irish Bank and Bank of Ireland, French Societe Generale, Puerto Rico?s Banco Popular, Swiss UBS, Belgian Dexia, Brazil?s Ita? Unibanco, German Bayerische Landesbank, Dresdner Bank and Commerzbank.

The Federal Reserve however maintained that all U.S. depository institutions and U.S. branches and agencies of foreign institutions that maintained deposits subject to reserve requirements were eligible to borrow from the Federal Reserve?s discount window.

Yet according to reports, the TAF was used over 4,200 times by numerous foreign banks and though industry watchdogs had already come down heavily on the Treasury Department for its relief programme that ran in parallel to the Fed?s policies. Under the former over $700 billion had been supplied to European counterparties to U.S. banks.