Cal i'm with you. who knows what these crooks are concocting behind the curtain. nothing like big daddy having your back in case your risky plans fail.
Owner Earnings:
I wonder that myself. And the street acts like they don't have a care in the world. Either that, or everyone is scared sh-tless into not doing anything.
I don't get it.
25% increase in discount window loans to banks, but less than 1/2 of 1% increase in loans to Wall Street bond dealers.
Which one is news?
The FR will dilute the fiat's store of value / command over resources.
That's the simplest, most honest way of keeping the "system" stable.
They're stealing from the savers. Reagan did this. Our Founding Fathers did this with the Continental. BB is acting as a stand-up American patriot.
Huzzah!
Like it or not, one must swim along with this tide or see the economic sum total of one's life effort sucked out in this gargantuan riptide.
The FR lendings, FM & FM lendings all are dilutions. Smart holders of stores of value are not standing idly by. This is not a time to become conservative. Bold positioning contra the direction of the FR, FM & FM are yielding and will yield very pleasing returns.
If there's a lesson in Weimar, it's time for the smart here to apply it...go with the tide.
(After all, those thieving FB's and lender-affiliated greedaholics did it in the past, and it's time to do it again, the Weimar Way.)
Cal writes:
Can it be the banks figuring out how to make more money off the money the fed gives them instead of lending to each other?
A 'theory' I see tossed around is that the various Term Auction Facilities (alphabet soup) extended to the IB's as a means of re capitalizing (strengthening their financial positions by increasing their cushion and deleveraging) are not being used as envisioned. In fact they are increasingly being utilized to chase quick (and often risky) profits. The notion is that risk has been mitigated by the FED in certain types of financial investments (too important to fail). The strategy is to continue to extract quick profits from the very investment strategies that got the IB's into their over leveraged positions without the risk of loss. In fact I see that some IBs are leveraged higher than ever.
What has happened is that a huge 'pool of hot money' has been created and it keeps sloshing back and forth between commodities and equities. And with each cycle hordes of inept traders get sheared - sell into the rally, short the top, repeat as necessary). The IB's are now, more often than not, the folks who are profiting from short positions.
As for sudden increase in investment companies such as AIG raising capital cushion funds obtained against 'debentures'..a theory that I have heard is that the hedge funds are buying this stuff. They borrow from their broker-dealer buddies who are back stopped by the Fed. They then short the underlying stock to hedge their investment.
Anyway, I don't think that this is the way that the system is supposed to work - then again who knows how this stuff is supposed to work anymore....
And I see more and more new credit card line offers in my mail box everyday...back to levels of last year...big lines at very low rates...from Citi and JPMorgan..
What gives? I thought they were unable/unwilling to go down this road any longer.
"Mistah Bonzai writes:
...
Anyway, I don't think that this is the way that the system is supposed to work - then again who knows how this stuff is supposed to work anymore...."
I'd hate to rain on everyone's parade, but this is exactly how the system is supposed to work.
If you actually read what the central bankers say they are doing, they will tell you that they intend to steepen the yield curve.
For obvious reasons, they do not jump up and down and scream that they are doing this so that banks can make money hand over fist. Instead, they will cloak it in euphemism and say this "helps recapitalize the banking system". This happens in every cycle. And it doesn't make too much of a difference whether they use the discount window or "standard" open market operations.
May 15 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis urged policy makers today to choose between bailing out Wall Street investment banks or let the ``hotbeds of risky financial innovation'' fail as the market dictates.
After months of yes yes to the banks, through lower rates opening up the discount window, capital increases through sovereign wealth funds, and then equity issuances, I think we're close to being out of powder. The fed can't lower rates another 3+%, the sovereign wealth funds got hosed on their last capital injections and the cr*p being put to the window has to be redeemed at some point or else the govt has to admit that it'll swallow it (big day for the Euro when that announcement comes).
All this and the economy has only begun its downturn. What happens when the economy slows in a big way in the second half and nobody's home in DC because the election's on?? this is looking extremely ugly IMHO
FT-ECB concern over liquidity scheme
"The European Central Bank on Thursday voiced its high concern at growing evidence that banks are exploiting its efforts to unblock the frozen funding markets by using its liquidity scheme to offload more risky assets than it envisaged." FT.com / Europe - ECB concern over liquidity scheme
Is there any way that the Fedreal Reserve can bankrupt itself by making all these ridiculous, worthless loans?
Is that possible? Could they do themselves in with this nonsense? Or, conversely (depending on you feel about the Fed), could we perhaps get rid of them that way?
Banks are probably using a lot of the cheap money to engage in the carry trade: the selling of dollars to buy currencies that can be used to buy high-yielding bonds [1] (e.g., Icelands bonds that recently paid 15% interest [2]). The tell? U.S. money supply is growing much faster than inflation [3]. (Inflation is a byproduct of money supply growth and credit creation; when money-supply growth outpaces inflation, credit is contracting.)
Of course, this trade weakens the dollar, which raises the cost of U.S. imports (e.g., food, oil) and reduces the value of U.S. government bonds that have a fixed interest rate.
Worse still for Americas wage-earners and foreign creditors, the Fed is exploring ways to increase its lending dramatically [4].
Any crisis now accelerates the trend toward greater public laxity, private excess and central bank secrecy. A crisis, real or manufactured, is most useful to increase the amount of public money clandestinely extended and diminish public oversight and administrative review of outcomes. This has been the pattern for at least 25 years, and may continue for some time to come before a taxpayer or creditor revolt ends the American spiral downwards towards bankruptcy and corporate tyranny.
Yes, Will T, you hit the nail on the head.
Will the banks pay back the loans in 28 days? Or, will the banks roll-over the loans every 28 days.
The $64,000 question is: Will the banks ever pay back the loans?
Sweetheart loans at a 0.25% or 0.1% interest rate.
If the banks claim they need the money and cant pay back the loan, what is the Fed going to do? I think we know what this Fed will do. The Fed will drop its pants and sing a Michael Jackson song:
Dont Stop Til You Get Enough
Keep On With The Force Dont Stop
Dont Stop Til You Get Enough
Keep On With The Force Dont Stop
Dont Stop Til You Get Enough
Keep On With The Force Dont Stop
Dont Stop Til You Get Enough
No the Fed cant go broke, i dont have the link but Paulson said the Treasury will backstop the Fed to keep the windows open. In other words what ever it takes to keep it propped up. The only controlling factor right now is crude the more slosh the higher crude will go.
Its funny how quickly this went from "showing weakness" to the industry norm....
I remember someone commenting that they wouldnt do business with a bank that frequented the discount window....
Now its all the rage! ! ! !
Can it be the banks figuring out how to make more money off the money the fed gives them instead of lending to each other?
Cal i'm with you. who knows what these crooks are concocting behind the curtain. nothing like big daddy having your back in case your risky plans fail.
TROUBLE IN LI PARADISE - NYPOST.com
Homes in the Hamptons are obviously not immune from foreclosure
My money is overseas. So what do I care?
Why would the pace be picking up? Haven't the banks heard? The credit crisis is over.
At 2% can you blame them?
Trash for cash.
Cal and Richard - I've been wondering this myself.
Would be nice to get a few billion at 1% to play with, wouldn't it?
Especially with virtually no strings or restrictions. Especially if you are "too big to fail."
Would be kinda hard not to make a few million - but I have faith in the banks - they'll find a way.
I would hesitate to call these cash loans. The cash loans exceed the value of the collateral for the loans by a wide margin.
Doesn't anybody realize that the Fed will allow the borrowers to roll the loans forward indefinitely?
Doesn't anybody realize that even though they are called loans, due to the terms they are really equity infusions?
Does reality even matter anymore?
Turn off your brain, and buy stocks.
End of line.
Are the banks using the Fed window because it's cheaper or because they can't borrow elsewhere?
Owner Earnings:
I wonder that myself. And the street acts like they don't have a care in the world. Either that, or everyone is scared sh-tless into not doing anything.
Will T writes:
I would hesitate to call these cash loans. The cash loans exceed the value of the collateral for the loans by a wide margin.
Doesn't anybody realize that the Fed will allow the borrowers to roll the loans forward indefinitely?
Doesn't anybody realize that even though they are called loans, due to the terms they are really equity infusions?
Anyone else have a feeling that the Fed is just going to "assume" the collateral and let the banks keep the treasuries?
I don't get it.
25% increase in discount window loans to banks, but less than 1/2 of 1% increase in loans to Wall Street bond dealers.
Which one is news?
The FR will dilute the fiat's store of value / command over resources.
That's the simplest, most honest way of keeping the "system" stable.
They're stealing from the savers. Reagan did this. Our Founding Fathers did this with the Continental. BB is acting as a stand-up American patriot.
Huzzah!
Like it or not, one must swim along with this tide or see the economic sum total of one's life effort sucked out in this gargantuan riptide.
The FR lendings, FM & FM lendings all are dilutions. Smart holders of stores of value are not standing idly by. This is not a time to become conservative. Bold positioning contra the direction of the FR, FM & FM are yielding and will yield very pleasing returns.
If there's a lesson in Weimar, it's time for the smart here to apply it...go with the tide.
(After all, those thieving FB's and lender-affiliated greedaholics did it in the past, and it's time to do it again, the Weimar Way.)
You've gotta wonder what LEH, GS MER... are doing with this free cash. Shorting the CDS market?
Exchange trash and cash in enough volume, and no one will be able to tell the difference between them.
Cal writes:
Can it be the banks figuring out how to make more money off the money the fed gives them instead of lending to each other?
A 'theory' I see tossed around is that the various Term Auction Facilities (alphabet soup) extended to the IB's as a means of re capitalizing (strengthening their financial positions by increasing their cushion and deleveraging) are not being used as envisioned. In fact they are increasingly being utilized to chase quick (and often risky) profits. The notion is that risk has been mitigated by the FED in certain types of financial investments (too important to fail). The strategy is to continue to extract quick profits from the very investment strategies that got the IB's into their over leveraged positions without the risk of loss. In fact I see that some IBs are leveraged higher than ever.
What has happened is that a huge 'pool of hot money' has been created and it keeps sloshing back and forth between commodities and equities. And with each cycle hordes of inept traders get sheared - sell into the rally, short the top, repeat as necessary). The IB's are now, more often than not, the folks who are profiting from short positions.
As for sudden increase in investment companies such as AIG raising capital cushion funds obtained against 'debentures'..a theory that I have heard is that the hedge funds are buying this stuff. They borrow from their broker-dealer buddies who are back stopped by the Fed. They then short the underlying stock to hedge their investment.
Anyway, I don't think that this is the way that the system is supposed to work - then again who knows how this stuff is supposed to work anymore....
And I see more and more new credit card line offers in my mail box everyday...back to levels of last year...big lines at very low rates...from Citi and JPMorgan..
What gives? I thought they were unable/unwilling to go down this road any longer.
"Mistah Bonzai writes:
...
Anyway, I don't think that this is the way that the system is supposed to work - then again who knows how this stuff is supposed to work anymore...."
I'd hate to rain on everyone's parade, but this is exactly how the system is supposed to work.
If you actually read what the central bankers say they are doing, they will tell you that they intend to steepen the yield curve.
For obvious reasons, they do not jump up and down and scream that they are doing this so that banks can make money hand over fist. Instead, they will cloak it in euphemism and say this "helps recapitalize the banking system". This happens in every cycle. And it doesn't make too much of a difference whether they use the discount window or "standard" open market operations.
Sounds like someone is unhappy they are not getting a backstop on the CFC deal:
Bank of America CEO Queries Aid for Investment Banks (Update1) - Bloomberg.com
May 15 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis urged policy makers today to choose between bailing out Wall Street investment banks or let the ``hotbeds of risky financial innovation'' fail as the market dictates.
After months of yes yes to the banks, through lower rates opening up the discount window, capital increases through sovereign wealth funds, and then equity issuances, I think we're close to being out of powder. The fed can't lower rates another 3+%, the sovereign wealth funds got hosed on their last capital injections and the cr*p being put to the window has to be redeemed at some point or else the govt has to admit that it'll swallow it (big day for the Euro when that announcement comes).
All this and the economy has only begun its downturn. What happens when the economy slows in a big way in the second half and nobody's home in DC because the election's on?? this is looking extremely ugly IMHO
Greasy hair Sheila Bair wants us to send our pennies to the FDIC in a new campaign named Pennies From Heaven and Hell...
Pennies From Heave - Wikipedia, the free encyclopedia
FT-ECB concern over liquidity scheme
"The European Central Bank on Thursday voiced its high concern at growing evidence that banks are exploiting its efforts to unblock the frozen funding markets by using its liquidity scheme to offload more risky assets than it envisaged."
FT.com / Europe - ECB concern over liquidity scheme
This is a serious question:
Is there any way that the Fedreal Reserve can bankrupt itself by making all these ridiculous, worthless loans?
Is that possible? Could they do themselves in with this nonsense? Or, conversely (depending on you feel about the Fed), could we perhaps get rid of them that way?
Thanks for any serious insight into this.
Banks are probably using a lot of the cheap money to engage in the carry trade: the selling of dollars to buy currencies that can be used to buy high-yielding bonds [1] (e.g., Icelands bonds that recently paid 15% interest [2]). The tell? U.S. money supply is growing much faster than inflation [3]. (Inflation is a byproduct of money supply growth and credit creation; when money-supply growth outpaces inflation, credit is contracting.)
Of course, this trade weakens the dollar, which raises the cost of U.S. imports (e.g., food, oil) and reduces the value of U.S. government bonds that have a fixed interest rate.
Worse still for Americas wage-earners and foreign creditors, the Fed is exploring ways to increase its lending dramatically [4].
Is an epic battle looming?
Interesting times...
[1] Video - Business, finance, and personal finance news from CNNMoney.com
Inflation, Money Supply, GDP, Unemployment and the Dollar - Alternate Data Series
[2] Carry (investment) - Wikipedia, the free encyclopedia
Greenspan's latest gift to the markets. - By Daniel Gross - Slate Magazine
[3] Sorry. Page not found.
[4] Mish's Global Economic Trend Analysis: The Fed Is Terrified
Of course, commodities speculation is probably a popular use of the loans as well...
Right on cue! From RGE - Looting the Vaults at the Central Banks
Any crisis now accelerates the trend toward greater public laxity, private excess and central bank secrecy. A crisis, real or manufactured, is most useful to increase the amount of public money clandestinely extended and diminish public oversight and administrative review of outcomes. This has been the pattern for at least 25 years, and may continue for some time to come before a taxpayer or creditor revolt ends the American spiral downwards towards bankruptcy and corporate tyranny.
Yes, Will T, you hit the nail on the head.
Will the banks pay back the loans in 28 days? Or, will the banks roll-over the loans every 28 days.
The $64,000 question is: Will the banks ever pay back the loans?
Sweetheart loans at a 0.25% or 0.1% interest rate.
If the banks claim they need the money and cant pay back the loan, what is the Fed going to do? I think we know what this Fed will do. The Fed will drop its pants and sing a Michael Jackson song:
Dont Stop Til You Get Enough
Keep On With The Force Dont Stop
Dont Stop Til You Get Enough
Keep On With The Force Dont Stop
Dont Stop Til You Get Enough
Keep On With The Force Dont Stop
Dont Stop Til You Get Enough
No the Fed cant go broke, i dont have the link but Paulson said the Treasury will backstop the Fed to keep the windows open. In other words what ever it takes to keep it propped up. The only controlling factor right now is crude the more slosh the higher crude will go.