The Fed: Worlds Largest Pawn Shop
Understatement of the week: Larry Hatheway, chief economist at UBS: "Ultimately the problems we're facing go beyond illiquidity."
Boy and do they ever, as today, the Fed and other central banks became Tony Soprano, by forming the worlds largest pawn shop and loan sharking operation.
The Fed said it would launch a "temporary term auction facility" that banks can use to secure loans at its discount window.
Two auctions of up to $20 billion each in short term funding are scheduled next week.
The operations are open to thousands of banks rather than the 20 or so primary dealers involved with the daily Fed operations.
The Fed will be able to "inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations."
The Fed also opened foreign exchange swaps for up to $24 billion with the ECB European Central Bank and up to $4 billion with the Swiss National Bank.
In effect, the Fed will lend dollars to these central banks, which can then lend them to commercial banks in Europe.
The Bank of Canada said it would also launch a temporary auction facility and would expand the list of securities eligible as collateral for central bank loans.
The BOE Bank of England said it would offer three month loans, also against a wider range of collateral.
The Fed's 12 district banks will accept the same "wide variety" of collateral that is used for discount-rate loans.
The measures are "designed to address elevated pressures in short-term funding markets."
A Fed official told reporters that the U.S. central bank's efforts won't add net liquidity to the banking system.
The Nattering One muses... How bad do you think the situation really is? This is worse than Tony Soprano opening a pawn shop operation.
The Fed will lend money through the ECB, to European banks which hold a ton of US MBS, and UK banks, which hold the bulk of commercial MBS, and boy is it stinkin up the joint.
The Fed is owned by the member US banks, and will accept a "wide variety" of collateral, for the member and Euro banks. Isn't that extra special?
The regional Fed banks will determine the haircuts on the assets submitted.
Wonder what the vig will be on those consumer boat loans that have been submitted at the discount window of late?
I hope the haircuts will generate, much like the convertible stock coupons used to bail out Countrywide, UBS, Citibank and others, at least 10% towards the Treasury.
This is like Tony Soprano having to lend money to his loan sharks, because they can't raise enough cash through collections...
and no one will take their markers, but he will, like a pawn shop, at a hair cut. And there won't be ANY net liquidity added to the system?
After all the massive liquidity injections since August, central bank officials have expressed frustration that banks haven't made more use of direct loans from the Fed.
The lament is that banks won't lend to each other and officials wonder where all the injected money went. Yo Tone, I got your answer, right here...
The Ted spread widened to 2% in August, its over 2% again as of yesterday.
The Ted spread being the difference between Fed Funds and LIBOR London InterBank Offered Rate (or what banks charge each other for loans.)
The larger the gap in the Ted spread, the higher the risk premium or cost. Does that imply less trust? or house about...
Its not that the banks don't trust each other... They don't trust the quality of the loans, or rating of the debt, or the value of the underlying assets (REAL ESTATE).
Because they know what a sham and fraud it is to start with, and they know the only direction its value can go is DOWN.
The fact is, the already injected money went straight to bolster dwindling or below requirement reserves, and could not be lent to anyone at any price.
The central banks must now act as intermediary to launder the funny money and bad debt these banks are holding and cannot sell at any price.
An old axiom comes to mind, if it smells, acts and looks like shit, it probably is.
And the central banks are about to get the biggest load of shit in history dumped on them by these "generally sound" non member banks.
The Nattering One can't wait for the first default on assets left at the pawn shop, er Fed discount window.
Or the first default on auctioned money, what will Tony, er I mean Bennie & The Feds do then, whack da guy?
Boy and do they ever, as today, the Fed and other central banks became Tony Soprano, by forming the worlds largest pawn shop and loan sharking operation.
The Fed said it would launch a "temporary term auction facility" that banks can use to secure loans at its discount window.
Two auctions of up to $20 billion each in short term funding are scheduled next week.
The operations are open to thousands of banks rather than the 20 or so primary dealers involved with the daily Fed operations.
The Fed will be able to "inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations."
The Fed also opened foreign exchange swaps for up to $24 billion with the ECB European Central Bank and up to $4 billion with the Swiss National Bank.
In effect, the Fed will lend dollars to these central banks, which can then lend them to commercial banks in Europe.
The Bank of Canada said it would also launch a temporary auction facility and would expand the list of securities eligible as collateral for central bank loans.
The BOE Bank of England said it would offer three month loans, also against a wider range of collateral.
The Fed's 12 district banks will accept the same "wide variety" of collateral that is used for discount-rate loans.
The measures are "designed to address elevated pressures in short-term funding markets."
A Fed official told reporters that the U.S. central bank's efforts won't add net liquidity to the banking system.
The Nattering One muses... How bad do you think the situation really is? This is worse than Tony Soprano opening a pawn shop operation.
The Fed will lend money through the ECB, to European banks which hold a ton of US MBS, and UK banks, which hold the bulk of commercial MBS, and boy is it stinkin up the joint.
The Fed is owned by the member US banks, and will accept a "wide variety" of collateral, for the member and Euro banks. Isn't that extra special?
The regional Fed banks will determine the haircuts on the assets submitted.
Wonder what the vig will be on those consumer boat loans that have been submitted at the discount window of late?
I hope the haircuts will generate, much like the convertible stock coupons used to bail out Countrywide, UBS, Citibank and others, at least 10% towards the Treasury.
This is like Tony Soprano having to lend money to his loan sharks, because they can't raise enough cash through collections...
and no one will take their markers, but he will, like a pawn shop, at a hair cut. And there won't be ANY net liquidity added to the system?
After all the massive liquidity injections since August, central bank officials have expressed frustration that banks haven't made more use of direct loans from the Fed.
The lament is that banks won't lend to each other and officials wonder where all the injected money went. Yo Tone, I got your answer, right here...
The Ted spread widened to 2% in August, its over 2% again as of yesterday.
The Ted spread being the difference between Fed Funds and LIBOR London InterBank Offered Rate (or what banks charge each other for loans.)
The larger the gap in the Ted spread, the higher the risk premium or cost. Does that imply less trust? or house about...
Its not that the banks don't trust each other... They don't trust the quality of the loans, or rating of the debt, or the value of the underlying assets (REAL ESTATE).
Because they know what a sham and fraud it is to start with, and they know the only direction its value can go is DOWN.
The fact is, the already injected money went straight to bolster dwindling or below requirement reserves, and could not be lent to anyone at any price.
The central banks must now act as intermediary to launder the funny money and bad debt these banks are holding and cannot sell at any price.
An old axiom comes to mind, if it smells, acts and looks like shit, it probably is.
And the central banks are about to get the biggest load of shit in history dumped on them by these "generally sound" non member banks.
The Nattering One can't wait for the first default on assets left at the pawn shop, er Fed discount window.
Or the first default on auctioned money, what will Tony, er I mean Bennie & The Feds do then, whack da guy?
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