Is it true this latest episode has been brought about by the pricing and enforcing of the credit default swaps triggered by Lehman? Seems the banks don't have the money to pay the counterparty claims. This in turn triggers more CDS. All the money we can muster in the world would not pay off 60 trillion in CDS. This in not going to go well over the next 6 months...
Listening to NPR this morning, I got treated to a sob story report on non-profits getting hit by higher borrowing costs. Apparently they are having to halt construction due to borrowing costs rising to 7% or more.
Now, I'm just as sympathetic as the next guy, but these rates don't seem that high. How about just not building that new community center if you don't have the cash? What were borrowing costs like in the early 80's - I'm guessing much higher.
"LONDON (MarketWatch) -- The U.S. Federal Reserve is reportedly looking at getting into unsecured lending, an extreme step that could allow it to directly purchase commercial paper, according to a report in the Financial Times. The report said the Fed had never done so in its history, but doing so could allow it to participate in the frozen inter-bank money market and the contracting commercial paper market. The Fed doesn't believe it has the legal mandate to make unsecured loans, so it would need the Treasury to guarantee any losses. "
So why do the geniuses in power keep trying the same ineffective things to solve this problem? They are like the laboratory rat that keeps pressing the lever, hoping for a food pellet, but getting a shock instead. Even a dumb rat knows to stop after a few zaps, but not our leaders. zap, ouch, zap, ouch, zap, ouch........
Following the problems in the financial sector in the US, uncertainty has now hit Japan.
In the last 7 days the Origami Bank has folded, the Sumo Bank has gone belly up and the Bonsai Bank announced plans to cut some of its branches. Yesterday, it was announced that the Karaoke Bank is up for sale and will likely go for a song, while todays shares in the Kamikaze Bank were suspended after they nose-dived. While Samurai Bank is soldiering on following sharp cuts, the Ninja Bank is reported to have taken a hit, but they remain in the black. Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at the Sushi Bank where it is feared that staff may get a raw deal.
does anyone take issue with the fact that barclays just begged for 15bln sterling from central bank of england after 2 weeks ago promising to retain most of lehman's eployees in ny and guaranteeing them 80% of last year's bonus? this is the true crime here...congress seems to be catching onto this too..many congressmen inquired as to why such massive bonuses were paid out last year when the credit crisis was in full swing. the bonus payouts for the year 2007 at merrill, lehman and other inv banks was a crime.and they were financed by soon-to-come capital raises..people should focus on this crime of wall st...LAST YRS BONUS PAYOUTS
I've seen it published the total bonus money paid by the Wall Street firms 2000-2007 was $192 billion.
Did they people who received that money step up to buy back shares or in any other way help to keep their companies afloat? No, they left with the cash like the looters they are. They decided it was 'their' money, not the shareholder's or bondholders.
Unsecured lending? What's next? The Fed does payday loans and bookmaking?
Comrade Dope Baron Von Helmut
Is it really that much worse than the "secure assets" they are taking at this point. Of course it's not really unsecured for the Fed since your tax dollars are guaranteeing the loans.
I feel privileged that Greenspan recommended to us all that using ARMs would be a prudent financial choice.
Though what is the LIBOR thing, and how will it make a difference to all those decent, Fed fearing Americans negatively amortizing as quickly as they can?
Banks have a lot of loans that are based on Libor + xx%. Since they have no extra capital to lend, and they have all the liquidity they need from the BoE, they might as well jack LIBOR up. No interbank loans are going through at that rate so it's meaningless
I wish I could hold out hope that when the Fed acts as lender of last resort to every company and it's bankrupt subsidiary, it will do so at punitive rates.
It's in section 2 of the investor handbook about buying shares low and selling them high.
But these investors are not reading the asterisked footnote about past performance or whether the timeline for realized gains will be in your lifetime.
In retrospect, the clue should have been when the IBs went public. Just like the VCs in DotCom days, the exit strategy for the IBs was to monetize by gong public before anyone figures out what is going on.
At Asia close through to Euro Open, Futures were down in America
Then Treasury announcement got some people excited, Futures were up +0.5% over previous day
The announcement was a minor affair, announcing some 28 day auction dates
Market got bummed out that they CB wasn't cutting 100bp today, and that 3pm-4pm hollow surge will be corrected
Yippee, short ban expires tomorrow! Sadly the UK ban runs for a few more months but we have to work with what we have, right?
Re, commercial paper, can the Fed really afford to do this?
Re Iceland, I saw Russia just injected EUR 4 bilion via a loan, doubling the country's currency reserves AND Iceland has just pegged its currency to the euro.
Why is it that this government and the Fed will do everything but the obvious -- recapitalizing the damn banks. Why are they so stupid?
They are not stupid. The administration is trying to save existing management teams - the current top dogs. Socialism for the rich, capitalism for the poor.
o.k. CP is used for short-term needs, basically day-to-day operations, including salaries. So the FED is BUYING CP, in essence giving money directly to businesses with out collateral...basically the fed is now paying wages...just nationalize and declare a New Age of the JUNTA.
Time for withdrawal, what is it with all these numbnuts that think this is going to instill a lot of CONfidence for depositors. Grab your money and run like hell.
CP is used for short-term needs, basically day-to-day operations, including salaries - blackhat
I keep reading this over and over, that business need to borrow to meet their payroll, but I just can't get my head round it. How can these companies not even have enough cash in the bank to pay their staff week to week? Is this considered wise cash management because cash is not sitting around, and I'm just real unsophisticated? Or is this, as it seems to me, wildly careless?
Thai Protesters Trap Legislators
By SETH MYDANS and THOMAS FULLER 13 minutes ago
In a day of street battles that left more than 100 people injured, thousands of anti-government protesters surrounded the Thai Parliament on Tuesday.
They can save our houses, our 401K's, our credit cards, our car loans, our student loans, our wages, pay operating expenses for corporations and bail out foreign banks all before breakfast.
So now the Fed is going to buy commercial paper. This is becoming absolutely ridiculous. I think we need to start calling politicians to demand that this crap is stopped, and there is some accountability returned to this government.
The Treasury believes this facility is necessary to prevent substantial disruptions to the financial markets and the economy and will make a special deposit at the Federal Reserve Bank of New York in support of this facility
Can the Treasury do this without raising the debt ceiling further? The FEDs balance sheet seems pretty thin at this point, and the bulk of the headroom in the national debt is from the just passed $700B bailout.
So, I am confused as to how this gets ample funding to be sure that they can support the entire CP market.
There was a quaint old concept once in the financial industry called "fiduciary responsibility" and I'm trying to remember what it was exactly. I believe this was before the days of Golden Parachutes and nonperformance performance bonuses.
I think what you might also be seeing is that they are getting whacked by something unexpected.
They usually have a board of directors from the community and some of these financial/business types might have engaged them in arbitrage in the thought that the excess proceeds would be used to pay down the difference. With the blowup, the rates on their proffered bonds have risen and the non-profits are having to eat into operational or endowment in order to meet the interest obligations.
i dont anything about the market,but even to me it doesnt look right everythings out of kilter and going from one to the other. one day its this next day its that. my explaintion is right the market. this is weird just a feeling of "huh"
short ban end weds 11;59pm so you got to wait til 930a thurs? ajc says market reacts favoribly hmmm the feds like the market.both going round in circles.
I think we need to start calling politicians to demand that this crap is stopped, and there is some accountability returned to this government.
Our Government Sucks
That was last weeks activity.
At&t,sprint and verizon thank you for your humble efforts.
Someone please tell why the rates given to deposits are still so low, like 3+%?
All this money crisis should make savers valuable; But I don't see that. Governments want to solve problems by rubber checking rather than promoting thrift and savings. Shameful.
BSR writes:
Someone please tell why the rates given to deposits are still so low, like 3+%?
You are looking in the wrong country. You can get 8% from Bank of Ireland and it is 100% guaranteed by the Irish government. Does not have to be in Euros - can be GBP via a UK branch. No maximum amount. 18 month lockup. You can get sligtly lower rates from other Irish banks without lockup.
The U.S. government's $700 billion rescue plan was meant to soothe the global financial system, restoring trust and confidence. Yet just days after its approval, it looks like a pebble tossed into a churning sea.
Just a pebble? Boo hoo. $700 billion doesn't even cover the lost value of mortgaged real estate over the past 2 years.
Why borrow from other banks when you can borrow at crazy-low interest from your central bank?
Secundus ad neminem.
I think you might find that central bank lending is auctioned off. And sometimes (like closing of Q3) crazy rates are paid (like 11%)
Looks like mortgage rates are going up in Canada (by a full percentage point):
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Thank God Congress rushed through that bailout, or the LIBOR would have skyrocketed.
Oh.
Is it true this latest episode has been brought about by the pricing and enforcing of the credit default swaps triggered by Lehman? Seems the banks don't have the money to pay the counterparty claims. This in turn triggers more CDS. All the money we can muster in the world would not pay off 60 trillion in CDS. This in not going to go well over the next 6 months...
Listening to NPR this morning, I got treated to a sob story report on non-profits getting hit by higher borrowing costs. Apparently they are having to halt construction due to borrowing costs rising to 7% or more.
Now, I'm just as sympathetic as the next guy, but these rates don't seem that high. How about just not building that new community center if you don't have the cash? What were borrowing costs like in the early 80's - I'm guessing much higher.
Anyone with any predictions?
What will Europe do? The FED?
Global coordinated cuts?
Anything?
http://www.marketwatch.com/news/story/fed-reportedly-looking-unsecured-lending/story.aspx?guid={FE856AB9-B78B-485B-9209-676B8E898EBB}&dist=msr_4
"LONDON (MarketWatch) -- The U.S. Federal Reserve is reportedly looking at getting into unsecured lending, an extreme step that could allow it to directly purchase commercial paper, according to a report in the Financial Times. The report said the Fed had never done so in its history, but doing so could allow it to participate in the frozen inter-bank money market and the contracting commercial paper market. The Fed doesn't believe it has the legal mandate to make unsecured loans, so it would need the Treasury to guarantee any losses. "
We are having some cliff diving over here today. Neat chart on Royal Bank of Scotland stock price on the link.
FT Alphaville » Blog Archive » The Royal Bank run
Lehman's Fuld at the Gym
Lehman CEO Punched at Gym
So why do the geniuses in power keep trying the same ineffective things to solve this problem? They are like the laboratory rat that keeps pressing the lever, hoping for a food pellet, but getting a shock instead. Even a dumb rat knows to stop after a few zaps, but not our leaders. zap, ouch, zap, ouch, zap, ouch........
Update from Japan......
Following the problems in the financial sector in the US, uncertainty has now hit Japan.
In the last 7 days the Origami Bank has folded, the Sumo Bank has gone belly up and the Bonsai Bank announced plans to cut some of its branches. Yesterday, it was announced that the Karaoke Bank is up for sale and will likely go for a song, while todays shares in the Kamikaze Bank were suspended after they nose-dived. While Samurai Bank is soldiering on following sharp cuts, the Ninja Bank is reported to have taken a hit, but they remain in the black. Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at the Sushi Bank where it is feared that staff may get a raw deal.
What? Didn't "capitulation" happen yesterday and fix everything so we can now live happily ever after???
The curse of ABN continues. ABN's CPDO was the straw that broke the camel's back on the credit crisis too.
does anyone take issue with the fact that barclays just begged for 15bln sterling from central bank of england after 2 weeks ago promising to retain most of lehman's eployees in ny and guaranteeing them 80% of last year's bonus? this is the true crime here...congress seems to be catching onto this too..many congressmen inquired as to why such massive bonuses were paid out last year when the credit crisis was in full swing. the bonus payouts for the year 2007 at merrill, lehman and other inv banks was a crime.and they were financed by soon-to-come capital raises..people should focus on this crime of wall st...LAST YRS BONUS PAYOUTS
The Spread in the TED falls mainly on the FED.
i have an urge to ride my bike down to wall street with some friends. just hang out for a bit shouting "jump! jump!" until we get chased away.
maybe later in the week after all this "pushing on a string" failure starts to sink in...
Everyone is Libor now.
CMBX trailing up again, too.
The CR never sleeps!
I guess the market is disappointed
it didn't get its daily bailout.
goose,
I've seen it published the total bonus money paid by the Wall Street firms 2000-2007 was $192 billion.
Did they people who received that money step up to buy back shares or in any other way help to keep their companies afloat? No, they left with the cash like the looters they are. They decided it was 'their' money, not the shareholder's or bondholders.
Unsecured lending? What's next? The Fed does payday loans and bookmaking?
Guest --
Update from Japan
OK that was funny.
I'm curious to see how the talking heads dismiss the dismal earning reports and holiday shopping season.
Agreed. No point in borrowing from the capital markets if we can all just borrow for ultra-low rates from the Fed.
Where's my Fed Visa (tm) card? Can I put a picture of a pony on it?
Unsecured lending? What's next? The Fed does payday loans and bookmaking?
Comrade Dope Baron Von Helmut
Is it really that much worse than the "secure assets" they are taking at this point. Of course it's not really unsecured for the Fed since your tax dollars are guaranteeing the loans.
VIX 52.05
Futures all negative
Short ban expires tomorrow.
Buckle up cowboys.
Fed announcement.
FRB: Press Release--Board announces creation of the Commercial Paper Funding Facility (CPFF) to help provide liquidity to term funding markets--October 7, 2008
I feel privileged that Greenspan recommended to us all that using ARMs would be a prudent financial choice.
Though what is the LIBOR thing, and how will it make a difference to all those decent, Fed fearing Americans negatively amortizing as quickly as they can?
Told you guys. The bounce everyone was expecting for today actually happened yesterday afternoon.
Guest,
Nice one.
What the hell just happened? Futures went crazy green.
Futures just spiked 3%.
Fed announced CP facility.
Hilarious. They timed one release for 8:15 (to disappoint the markets) and the other for 9:00 (to juice them).
FRB: Press Release--Board announces creation of the Commercial Paper Funding Facility (CPFF) to help provide liquidity to term funding markets--October 7, 2008
My take on this:
Banks have a lot of loans that are based on Libor + xx%. Since they have no extra capital to lend, and they have all the liquidity they need from the BoE, they might as well jack LIBOR up. No interbank loans are going through at that rate so it's meaningless
Is it bad that when I hear "special * vehicle" or something like that I immediately think scam?
unsecured abcp to be bought by fed as of NOW
I wish I could hold out hope that when the Fed acts as lender of last resort to every company and it's bankrupt subsidiary, it will do so at punitive rates.
Nemo writes:
Futures just spiked 3%
It's in section 2 of the investor handbook about buying shares low and selling them high.
But these investors are not reading the asterisked footnote about past performance or whether the timeline for realized gains will be in your lifetime.
Shame. Always read the footnotes.
Bounce on S&P today, short it this afternoon?
FED TO BUY CP
In retrospect, the clue should have been when the IBs went public. Just like the VCs in DotCom days, the exit strategy for the IBs was to monetize by gong public before anyone figures out what is going on.
re: Futures
At Asia close through to Euro Open, Futures were down in America
Then Treasury announcement got some people excited, Futures were up +0.5% over previous day
The announcement was a minor affair, announcing some 28 day auction dates
Market got bummed out that they CB wasn't cutting 100bp today, and that 3pm-4pm hollow surge will be corrected
Fed announces creation of commercial paper funding facility. It will buy 3 month CP and also asset backed CP. Funded by treasury.
no actual $$ amount given.
US taxpayer backed CDS's
Why is it that this government and the Fed will do everything but the obvious -- recapitalizing the damn banks. Why are they so stupid?
Any thoughts on how this will be funded?
The CP market is in the low trillions. There is no way the Treasury can fund that even during the current flight to safety demand for Treasuries.
So who wins and who loses? This is going to turn out to be another nail in the coffin.
Why borrow from the capital markets?
Fed or Die, baby!
Are we seeing Nature takeover for the Fed and forcing rates to RISE?
I hope those in agreement have heard of TBT.
futures continue to soar
Is Strategery Capital listing public soon?
Bill Gross & CNBC crew want to step up and buy some
Why is it that this government and the Fed will do everything but the obvious -- recapitalizing the damn banks. Why are they so stupid?
It would prove their supply/side Republican idealogy has failed
no actual $$ amount given.
Probably because the staffer who put out the announcement doesn't know how to type a ∞.
Jobless man kills family, self - Los Angeles Times
Yippee, short ban expires tomorrow! Sadly the UK ban runs for a few more months but we have to work with what we have, right?
Re, commercial paper, can the Fed really afford to do this?
Re Iceland, I saw Russia just injected EUR 4 bilion via a loan, doubling the country's currency reserves AND Iceland has just pegged its currency to the euro.
Good opportunity to short the market here. The Treasury simply does not have the capital to make a difference.
Another slap in the face, doomed to be less than promised.
Why is it that this government and the Fed will do everything but the obvious -- recapitalizing the damn banks. Why are they so stupid?
They are not stupid. The administration is trying to save existing management teams - the current top dogs. Socialism for the rich, capitalism for the poor.
o.k. CP is used for short-term needs, basically day-to-day operations, including salaries. So the FED is BUYING CP, in essence giving money directly to businesses with out collateral...basically the fed is now paying wages...just nationalize and declare a New Age of the JUNTA.
/ef
Iceland bans short-selling in biggest banks
Iceland bans short-selling in biggest banks
| Reuters
Time for withdrawal, what is it with all these numbnuts that think this is going to instill a lot of CONfidence for depositors. Grab your money and run like hell.
So what are we looking at? Dow opening up 400?
Fed announces new plan -
FED Savings and Loan, Creation of New National Bank Announcement--
i wonder if i can have a pony instead of a toaster. and a debit card!
EU insures all deposits up to $50K
CP market is about $1.6T per CNBC.
This will actually be funded by the Treasury, so $1.6T could in theory be available.
When will the US government start sending me those purty "0% on transfers" promotion in the mail?
Wow the Fed is unbelievably powerful now
FWIW:
it will guarantee bank deposits to 50k EUROS (not dollars)
Also:
several EU members will take stakes in their country's banks
they will also adopt accounting rules following the US. (probably will ease mark to market rules)
ew thread
CP is used for short-term needs, basically day-to-day operations, including salaries - blackhat
I keep reading this over and over, that business need to borrow to meet their payroll, but I just can't get my head round it. How can these companies not even have enough cash in the bank to pay their staff week to week? Is this considered wise cash management because cash is not sitting around, and I'm just real unsophisticated? Or is this, as it seems to me, wildly careless?
We could learn something from the Thai's
Thai Protesters Trap Legislators
By SETH MYDANS and THOMAS FULLER 13 minutes ago
In a day of street battles that left more than 100 people injured, thousands of anti-government protesters surrounded the Thai Parliament on Tuesday.
The Fed is like superman.
They can save our houses, our 401K's, our credit cards, our car loans, our student loans, our wages, pay operating expenses for corporations and bail out foreign banks all before breakfast.
Glod appears to like the new Fed vehicle. USD not so much.
So now the Fed is going to buy commercial paper. This is becoming absolutely ridiculous. I think we need to start calling politicians to demand that this crap is stopped, and there is some accountability returned to this government.
How can these companies not even have enough cash in the bank to pay their staff week to week?
Payroll smooth, revenue lumpy.
Can the Treasury do this without raising the debt ceiling further? The FEDs balance sheet seems pretty thin at this point, and the bulk of the headroom in the national debt is from the just passed $700B bailout.
So, I am confused as to how this gets ample funding to be sure that they can support the entire CP market.
ajc breaking news says fed to buy massive amounts of short term debt.
There was a quaint old concept once in the financial industry called "fiduciary responsibility" and I'm trying to remember what it was exactly. I believe this was before the days of Golden Parachutes and nonperformance performance bonuses.
central scrutinizer re non-profits:
I think what you might also be seeing is that they are getting whacked by something unexpected.
They usually have a board of directors from the community and some of these financial/business types might have engaged them in arbitrage in the thought that the excess proceeds would be used to pay down the difference. With the blowup, the rates on their proffered bonds have risen and the non-profits are having to eat into operational or endowment in order to meet the interest obligations.
Hell to pay for them.
At what point I wonder does the Treasury lose it's credibility here as backstopper of last resort?
i dont anything about the market,but even to me it doesnt look right everythings out of kilter and going from one to the other. one day its this next day its that. my explaintion is right the market. this is weird just a feeling of "huh"
Probably because the staffer who put out the announcement doesn't know how to type a ∞.
How do you type and infinity symbol???
short ban end weds 11;59pm so you got to wait til 930a thurs? ajc says market reacts favoribly hmmm the feds like the market.both going round in circles.
okay about that favoribly it went down. at 9;52 its 77.66 9;53 its 48.19? its in the red now!!!!!!
I have just started to buy money from the weimar republic. It will have some value at least.
I think we need to start calling politicians to demand that this crap is stopped, and there is some accountability returned to this government.
Our Government Sucks
That was last weeks activity.
At&t,sprint and verizon thank you for your humble efforts.
Someone please tell why the rates given to deposits are still so low, like 3+%?
All this money crisis should make savers valuable; But I don't see that. Governments want to solve problems by rubber checking rather than promoting thrift and savings. Shameful.
BSR writes:
Someone please tell why the rates given to deposits are still so low, like 3+%?
You are looking in the wrong country. You can get 8% from Bank of Ireland and it is 100% guaranteed by the Irish government. Does not have to be in Euros - can be GBP via a UK branch. No maximum amount. 18 month lockup. You can get sligtly lower rates from other Irish banks without lockup.
Yesterday it was worse! "The patient was on the floor, in cardiac crisis".
Check it out.
Today it is better. Heading in the right direction.
MarketWarnings: Commercial Paper Market - Fed Looks to Ease Strains
The more they do bailouts:
A deflationary crash will be averted.
Global Fears of a Recession Grow Stronger- NYT
The U.S. government's $700 billion rescue plan was meant to soothe the global financial system, restoring trust and confidence. Yet just days after its approval, it looks like a pebble tossed into a churning sea.
Just a pebble? Boo hoo. $700 billion doesn't even cover the lost value of mortgaged real estate over the past 2 years.