THEY WILL DO ANYTHING to keep this market from collapsing!!!!!!!!!!!!!!!!! Banks roll out $70 billion loan program By JOE BEL BRUNO, AP Business Writer 1 hour, 1 minute ago NEW YORK - A group of global banks and securities firms announced late Sunday a $70 billion loan program that financial companies can tap to help ease a credit shortage that threatens global financial markets. The ten banks, which include JPMorgan Chase & Co. and Goldman Sachs Group Inc., said they were committing $7 billion each for the pool. The pool would act as a signal to the marketplace that banks, brokerages, and other financial companies can lean on the fund to take care of borrowing needs. The banks said the program will be available to participating banks which can get a cash infusion up to a maximum of one-third of the total size of the pool. The size of the loan program might increase as "other banks are permitted to join." All participating banks intend to use this facility beginning this week, the statement said. The banks also include Bank of America Corp., Barclays PLC, Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, Merrill Lynch & Co., Morgan Stanley and UBS. The banks made the announcement to try to head off market disruptions after the possible failure of investment bank Lehman Brothers Holdings Inc. Lehman was expected to file for bankruptcy by Monday after succumbing to dwindling investor confidence due to losses from its real estate holdings.
Every one of those banks in the program is now officially a short in my book. Lets say there are 10 people who are underwater on their houses. They decide oh lets each contribute 25,000 to a fund that we all can borrow from. Then all of the sudden you have a fund with 250k in it. Only 3 things can result from such a fund: 1) Those who borrowed more than they put in are taking advantage of the other people in the pool by borrowing money for cheap at low interest rates. 2) Those who borrowed less than they put in are giving charity to those with borrowed more than they put in. They are giving away their money at low interest rates to others when they could get much higher interest rates elsewhere. 3) Unlikely scenario: Nobody borrows more than they put in, so the fund is really useless since they didn't borrow any money they didn't have. The markets won't be fooled for long by this type of nonsense. This is essentially creating a big pool of capital that all the banks can say: 'look i can borrow from that'. In reality, a lot of these banks will fail before the storm is over. Having a liquidity pool won't change the outcome or restore confidence.
Borrow up to 1/3 of the pool? This is classic everybody trying to live off everybody else. Its pathetic.
This is getting bizarre. Some serious fear and panic going on, would be interesting to see what would happen right away without all this drastic action. I know my puts would be more interesting lol