So how does that work? The Fed creates money to pay for the assets? or did the Fed already have the money?

The good news is the Fed marked up the value of the Bear Stearns assets to $26,863 from $26,802 million two weeks ago - an increase of $61 million!

Those marks are due to the new risk managers' familiarity with the positions - they just hired the risk guy from Bear...

411 Visitors Online. See I do just as good a job as haloscan, and I'm 100% beefcake, too.

This FT link was posted earlier today, and it bears (no pun) re-posting:

FT Alphaville » Blog Archive » Fed capitulates: the central bank is broken 

Talks about the increasing Fed balance sheet. Also mentions that Japan's central bank balance sheet hit 30% of GDP, so we've still got some room to grow

CR, instead of a "blue bar" can we have a little shark down in the lower right corner?

much of this is coming from special auction by the Treasury and more bank deposits - so the expansion is sterilized.

Can anyone tell me the exit strategy to this so called sterilization?

No charges for ex-NY governor in prostitution case
Federal prosecutors said Thursday that they will not bring criminal charges against Eliot Spitzer for his role in a prostitution scandal..
U.S. Attorney Michael Garcia said investigators found no evidence that Spitzer or his office misused public or campaign funds for prostitution. ...federal prosecutors typically do not prosecute clients of prostitution rings."

Does he get his old job back? It never was about the call girls; it was always about Sptizer exposing Goldman Sachs, JP Morgan, and Bearn Stearns rigged bidding and other misconduct selling investments and derivatives, such as interest-rate swaps, tied to municipal bonds. ….

That chart is so abrubt it's not even a parabola. And I thought exponential growth was unsustainable. Good grief!

Lockstep: It's what's on the balance sheet that's crucial.

If it's 20% of GDP value is really crap, then you've got trouble.

Earlier this year, Krugman noted that he used to teach the difference between developed countries central banks' balance sheets and emerging/undeveloped banks' balance sheets was the quality of assets. Developed countries balance sheets were usually nice t-bill (or the like) dominated clean sheets while undeveloped countries had a bunch of weird stuff in them.

Now our central bank balance sheet is getting crappier and messier every day.

I think the Fed should stick that chart on their foreheads, because they are a bunch of "Losers".

Hank Paulson is the son of Satan. Satan called him Junior, but "bloodthirsty sonofabitch" works, too.

anyone know where i can find more info on the bear markup? thx

Well, I just made a payment on Citicard 2.9% till I pay it off bonanze.

I guess it just was routed straight to the Fed after Citi creamed off the interest.

Well, sterilized is so harsh, disguised or lagged might be a better term.

Someday this war's gonna end...

Calculated Risk writes:
Basel Too, much of this is coming from special auction by the Treasury and more bank deposits - so the expansion is sterilized.

Is it real sterilized if the assets would otherwise have defaulted into worthlessness by now?

FED bubble - how do I short this puppy

Hank Paulson is the most under-rated hedge fund manager in history

St. Louis Fed: Series: RSBKCRNS, Reserve Bank Credit
Check out some of his Alpha
(I know Bernanke is the face of the operation, but Paulson owns the shop)

So who do you all think would make the best new Treas/sec?

How is this sterilized?

It seems to me that the Fed is "pretending to sterilize" as far as I'm concerned.

The things is received as assets/deposits in exchange for the cash is pretty much going into default/never going to be redeemed area.

Someone explain why this is still sterile?

Otherwise, if this is an unsterilized cloaking as a sterilized action, I think we're looking at hyperinflation as the only outcome of this act.

Deflation for now, Hyperinflation when the truth about sterilization-failure-intent gets out.

So who do you all think would make the best new Treas/sec?
Lawyerliz

I don't know who, but this would be the right candidate. First, she should be female. Then, she should be really good looking. Third, she should like to wear plunging necklines and short skirts. And finally, she should routinely like to pick things off the ground and not talk much.

if spitzer was smart

Didn't Spitzer start a distressed real estate fund after resigning?

I have been wrenching for 20 years and have never seen an hourly rate dropped

Then again, real estate never went down either.

You can't believe how difficult it is to explain to J6P how broadly asset deflation works its way through the real economy.

so those 'assets' of that extra trillion may be more questionable than a true asset should be
d | 11.06.08

Hello? Hello?

"I don't think there will be hyper-inflation or inflation..."

I've lived in periods of hyperinflation and inflation of commodities, services, education, real estate, and goods since the 70's. Wages tied to inflation was uncoupled in the late 70's. The government instituted deceptive accounting practices to hide the hyper/inflation. Credit cards replaced wage increases. The CPI was revamped from steak to hamburger to dog food--thanks Greenspan. Textiles are cheaper due to foreign slave labor. The dollar is worth what .40cents compared to the 50's?

"the hedge-fund firm co-founded by Nobel laureate Myron Scholes, temporarily stopped investor withdrawals from its biggest fund after it lost 29 percent in the first half of October."

You gots ta have a real big brain to pull that off.

Knurd!

Nostrovia,

"Actually the cost to date is $2.7 trillion once you factor in health care, disability benifits, equipment resets, etc."

It's unpatriotic to include all of the costs.

Nostrovia,

Comrade Misean is Dope,
Is it patriotic to lower the cost by including the money liberated from the old Iraqi national bank?

With regard to the FT piece on quantitative easing, I think that it is clear that a chunk of the yen printed by the BoJ didn't sit in vaults. It was shipped around the world via the carry trade to fuel inflation.

Excellent point. I completely agree.

The highlight of the H.4.1 report (at least for me) was the $185 billion increase in the Commercial Paper Funding Facility -- I almost thought they had resorted to electronic "printing" as there was not a commensurate increase from the Treasury injections (aka. the supplementary financing account). Then I noticed the $233 billion increase in Reserve balances with Federal Reserve Banks. Still sterilized, and the Fed holds any "risk" inherent in the Commercial Paper -- nice. BTW, the Fed recalculated the interest rate on balances kept with it by member banks.

EHP

Nostrovia,

Light-bulb moment....

Banks aren't required to allocate capital against reserves. So, a bank that is capital constrained would take deposits and simply let them pile up in its reserve account with the Fed. By letting them pile up (instead of loaning them out) the banks don't dip into capital.

So, the banking system is capital constrained so the total amount of in-the-bank money is fixed. The only way for somebody to get in-the-bank money is to convince somebody else with in-the-bank money to buy your assets. Of course, this means lower asset prices or a system lock-up.

Since the Federal Reserve Banks are the only bank that is exempt from capital requirements it buys the assets (commercial paper) on the open market. The sellers take the cash and dump it into the bank and it comes back onto the Fed's balance sheet as bank reserves.

Duh!

Hope the Federal Reserve chose wisely and that when banks want to lend out those reserves it wants to but the ABCP the Fed holds.