fdic today said banks using carry trade to buy stocks

Discussion in 'Wall St. News' started by piggie2000, Nov 10, 2009.

  1. and are not lending it out. never heard anyone admit it. this will end so badly

    FDIC boss: Big banks still aren't lending enough
    FDIC's Bair says big banks aren't lending enough, using 'carry trade' to make money

    By Stevenson Jacobs, AP Business Writer
    On 7:07 pm EST, Tuesday November 10, 2009
    Buzz up! 20 Print.NEW YORK (AP) -- The head of the Federal Deposit Insurance Corp. said Tuesday she's "very worried" that the nation's biggest banks aren't lending enough and warned the economy could take another turn for the worse without increased access to credit.

    FDIC Chairman Sheila Bair said the FDIC's upcoming quarterly report would show that "not many large institutions are doing a very good job of lending." Instead, she said, some are taking advantage of near-zero interest rates by borrowing dollars cheaply to buy higher-yielding assets like stocks or commodities -- a move known as the "carry trade."

    "I don't see much money going out (from banks). I see a lot of carry trade," Bair told a banking conference in New York. "It used to be you take deposits and you lend out money. We'd like to see more of that."

    Many banks have tightened lending standards following a wave of residential and commercial property defaults. Others say they want to lend but see little demand as consumers and businesses seek to pay off debt, not take on more.

    The lack of lending by large banks is dangerous at a time when many small and midsize banks are teetering on the brink amid the economic downturn, Bair said.

    "I'm very worried (that) the larger institutions don't seem like they're stepping up to the plate providing credit," Bair said. "Because if they don't do that, we're all in the soup."

    Addressing the rash of bank failures, Bair said the FDIC had enough funds to shut down troubled banks and would tap its line of credit with the Treasury only as a last resort. There have been 120 bank failures this year, and Bair predicted "many more" ahead.

    On the regulatory front, Bair reiterated her agency's bid to require banks to hold more capital as a buffer against rough times, even if it eventually reduces the amount of funds available to lend. She said the requirement would not only protect banks but could also help prevent asset bubbles by reducing excess credit in the financial system.

    "I think we have the authority and hopefully the will to do that," she said.
  2. ammo


    could u post a link, thanks
  3. Dacamic

    Dacamic Guest

  4. Isn't she making the argument to separate old-fashioned banking from investment banking (reinstate Glass-Steagall Act)? If banks divert resources into speculation while chasing those big bonuses, they starve Main St of needed credit.

    Forcing banks to make money the old fashioned way by lending would also make them more careful about their lending practices.
  5. kaciara


    i agree...

    correlation between stocks and carry trade currencies...
  6. ammo


    buying us stocks is basically the same as loaning US corporations cash, similar to foreigners buying our bonds... as long as stocks are up , the loan is paying off
  7. Collateral?
  8. ammo


    the spu's since june havent rallied more than 30 without a pullback, i think they are just buying , selling higher,pullback ,buy again, for a while is was 15 or 16 points, this recent sell from 1100 to 10 30 was the biggest , and we are right back at 1100, the fed is so desperate they are rigging the casino to save their but, i wonder if this Baer woman is out of the loop
  9. She forgot her meds :D
  10. Stok


    This is why u do not fight the TARP!

    The carry trade is using TARP money to buy stocks.

    You sell stocks once the TARP program is over and the Fed wants their $$ back.

    #10     Nov 11, 2009