JPM JP Morgan Chase, Bank of America, Wachovia each borrow $500 mln from Fed Discount Window; encourages use of it (45.62 -0.59) JPM, BAC, WB jointly announce today that they have made use, on a limited basis, of the discount window facility announced by the Federal Reserve Board late last week. In transactions intended to display the effectiveness of the facility, JPMorgan Chase, Bank of America and Wachovia each borrowed $500 mln, including some on a term basis, at the discount window. While JPMorgan Chase, Bank of America and Wachovia each have substantial liquidity and the capacity to borrow money elsewhere on more favorable terms, the companies believe it is important at this time to take a leadership role in demonstrating the potential value of the Fed's primary credit facility and to encourage its use by other financial institutions. Co's hope their actions today will highlight that point for the financial community and promote broad acceptance of the use of the facility.
That is really ugly. In the past borrowing from the discount window was merely a stopgap measure until the Fed could merge you into a healthy bank. Those fucking guys supposedly ARE healthy.
Citigroup taps Fed Discount Window for $500 mln to fund clients (47.83 -0.23) -Update : Co announces that on behalf of its clients clients, its Citibank unit has accessed $500 million in 30-day term financing under the discount window program announced on Friday by the Federal Reserve Bank of New York. Citibank stands ready to continue to access the discount window as client needs and market conditions warrant. Citi is pleased to inject liquidity into the financial system during times of market stress and to support creditworthy clients. Citibank carries a triple-A rating from Moody's Investors Service and a double-A-plus rating from Standard & Poor's, and has substantial liquidity and widespread borrowing capacity.
Ahh...borrowing money from other countries...who cares right. Although it is important to note that it is better to borrow money from the other banks instead from the FED.
The member banks are trying to snowball the market about who is in trouble. Someone will trade the inside information...watching!
Not at all. On this announcement, Citibank's CDS traded from 42.5bps this morning to 38.5bps - implying that the bank is less risky. It's a symbolic move.
Nothing like getting free money to help out the liquidty problems that they created..... All they do is continue to inject money into this market, seems that no matter what, to fix a problem this size all they have to do is print money and just hand it out. Dont think that can last forever. or can it??? :eek:
Here's what this is about. The Fed desperately wants to avoid cutting the funds rate, because they are rightly concerned about stagflation and the dollar. If they can give the market the impression that they are doing something, without actually doing anything, then they hope the credit logjam will break and confidence will return to lending markets. That's what last Friday's discount rate cut was about. Credit markets have largely ignored this move, but the equities markets are eating it up, which from the Fed's perspective is not exactly the outcome they were looking for. On Thursdays the Fed releases reserve statistics. They would have shown a negligible amount of lending at the discount window, revealing last week's "rate cut" as the sham it really was. In a last ditch effort to avoid messing with the Funds rate, Bernanke calls his buddies on Wall Street and convinces them to take out some token loans from the discount windows. This will cost them each about $200k in additional carrying cost over the next 30 days, but that's pocket change. They know that it is in their own best interests that the Fed has credibility here, because it is their own creditors who would be bailed out by a return of liquidity and risk tolerance in credit markets. In effect, Bernanke is painting the tape to make it look like he's done something when he really hasn't. Martin
The banks are borrowing on behalf of clients. Translation is that they don't want to take the collateral themselves but are more than happy to have the fed take it even if it costs them a bit more. Today was a test, if the markets don't freak which apparently they didn't then we will see much more of this in the coming days as the banks shift the bad stuff off their books and on to the Fed until things stabilize and "reasonable" bids return in commercial paper.