The reserve statistics are out: http://www.federalreserve.gov/Releases/h41/Current/ As of yesterday, primary credit outstanding was $2,001 million. In other words, aside from this $2B publicity stunt done at the behest of the Fed, only $1 million in actual primary credit was sought by truly needy borrower(s). That's the reality of last Friday's rate cut. A meaningless gesture which provides no liquidity, no safety net, just a psychological boost in a market desperate for good news. Martin
well then it is far from meaningless gesture isn't it. why to provide too much liquidity when nobody from eligible borrowers really needs it?
They can borrow by buying 13-week bills at 3.7. They can borrow from each other at less than 5, the effective FF last I checked. There are all kinds of places where they can "borrow at a cheaper rate." The frustration on this thread, and in virtually all of the other threads on this subject that have been opened, is proof that it was a truly deft move. The only thing lacking was confidence. This move restored that in the U.S. Europe, headed by Trichet, a blustering ass if ever there was one, might still blow this thing up though.
there is one true fact. the martage market has shut down. refis' are done, who wants to get in the way of this train? It is enivitable and time will surely tell. The bond mkt has ALLREADY lowered rates. Anyone with any knowledge of history knows this is not going to end well........That aside Happy Trading!!!
Well, as I posted in some other thread somewhere, panics are a regular thing, almost. One comes along once every couple of years, on average, far as I can tell. If every panic that came along led to recession and a bear market, we'd always be either getting into one or just getting out of one. So, each has to be judged on its own. My belief is that this one has had the healthy effect of killing off a large piece of the speculation that was pushing the market around prior to this. If I'm right, there's going to be a lot of money to be made playing both sides of this market over the next few years. If I'm wrong, we can all make money shorting the crap out of it.
They can borrow by buying 13-week bills at 3.7. That's called lending, not borrowing. Only the government can borrow at those rates. The frustration on this thread, and in virtually all of the other threads on this subject that have been opened, is proof that it was a truly deft move. It was certainly a deft move, but it's not going to be enough. The only thing lacking was confidence. If that were true, this crisis would be over. But it's not true, and the crisis isn't over. No amount of confidence will prevent Joe Subprime from defaulting on a mortgage he can't afford, and until Wall Street has figured out where all that bad debt is hiding, they're not going to have the confidence to start lending again. Martin
2/3rds of the great consumer just got there dicks cut off. would you buy our dollar right here right now? I am 65% long at the moment just for full disclosure
Erm, no, not true. Banks need short-term money very frequently. Buying a t-bill or borrowing FF or going to the discount window are all called "buying money". Sounds a bit peculiar at first, but you get used to it. The banks then turn around and lend this out longer term ("sell money"), charging more both because the term is longer and because, generally, the borrower isn't as negligible a credit risk as the USG. So on the one side they borrow money at 3.7, on the other side they lend it out at 6, or 19, if it's a credit card, or whatever. This is why a flat yield curve leads, and in this cycle certainly did lead, to banks doing crazy things to juice their profits. Now that we have a curve with an actual slope to it they can rein in their excellent adventures and make money by borrowing short and lending long.
Four banks step up and borrow $500 million each. Bank of America offers and invests $2 billion in the troubled mortgage giant Countrywide. Coincidence? I don't think so. There is going to be some interesting 10K's coming up.
Trefoil, I agree with you except the part about buying a t-bill. When a bank does an overnight repo, or borrows from the discount window, they are borrowing cash at 5.25% or 5.75%. The t-bill is collateral. But they aren't borrowing cash at the t-bill rate, nobody except the U.S. government can do that. Bank capital don't come from buying or selling t-bills, it comes from customer deposits. Martin