Mind Blow?: Borrowing by Banks Over the Last Year

Discussion in 'Economics' started by ByLoSellHi, Jun 7, 2008.

  1. Some of you probably get the newsletter that this comes from, but for those who don't, this should blow your mind.

    It's a chart showing the rate bank borrowing in the U.S. since 1910 - pay attention to the last year,

    in their own words,

    This is disturbing...

    One of the writers here at The Sovereign Society forwarded this graph from the St. Louis Fed earlier this week. It shows how much banks have borrowed from the Federal Reserve going back to 1910.

    As you'll notice, banks have somewhat increased their borrowing over the last year...


    What assets have banks used as collateral to borrow much of these new funds from the federal reserve (i.e. U.S taxpayers)?

    Let's just say a huge proportion of it is comprised of mortgage backed asset paper, which the fed has given out treasury notes, on a par value basis, in return.
  2. that is nuts
  3. I'm not convinced that chart is as meaningful or clear-cut as it first appears.
    Basing in constant nominal dollars doesn't provide much insight.
    I do agree it's an exercise in futility to argue with the conceptual aspect.

  4. This may need some clarity by the most knowledgeable of you in this matter.....I would hate to add to the panic that exist, but this should be seen and discussed more...PLEASE educate me in this matter!!!!!!!!!!

    Anyways this is how I am extrapolating this data.....

    We all know that if you give the bank $100....They must keep 10% in required reserves and can lend out the other 90%....


    So what I'm seeing on the latest filing by the FEDERAL RESERVE is that the required reserves needed by all US banks is 43.653 billion to meet the 10% requirement ....(Feeling good yet)

    So what are they reporting that they have in Non-Borrowed Reserves ......(negative)-130.303 billion...

    So my extrapolation: very inappropriate words come to mind!!!!!

    So are we suppose to add those together to come up with 173.956 billion that they need just to meet the 10% requirement...(I doubt this is correct).....It would be nice to know what the Fed actually has to lend without printing?

    I understand that the TAF program has come to the rescue, but still this is anything but healthy.....

    What would a 100% run on the banks look like.....436.53 Billion needed........ and I believe they are borrowing 130 billion just to meet the Required Reserve.....A little scary to think about....The question I am asking is are the Banks Broke with no fed lending!!!!

    So now we need to address the TAF....I will let the Fed do this:

    February 08, 2008
    Recent Declines in Nonborrowed Reserves

    The H.3 statistical release indicates that nonborrowed reserves of depository institutions have declined substantially since mid-December to a level that is now negative. This development reflects the provision of a large volume of reserves through the Term Auction Facility (TAF) and has no adverse implications for the availability of reserves to the banking system.

    By definition, nonborrowed reserves are equal to total reserves minus borrowed reserves. Borrowed reserves are equal to credit extended through the Federal Reserve's regular discount window programs as well as credit extended through the TAF. To maintain a level of total reserves consistent with the Federal Open Market Committee's target federal funds rate, increases in borrowed reserves must generally be met by a commensurate decrease in nonborrowed reserves, which is accomplished through a reduction in the Federal Reserve's holdings of securities and other assets. The negative level of nonborrowed reserves is an arithmetic result of the fact that TAF borrowings are larger than total reserves.

    Or a link to the Latest "Flow of Funds" release....

  5. Just print more. No big deal.
  6. drop in the bucket compared to the CDS market

    my favorite is the M3 chart.

    and people wonder why crude is $140
  7. :confused: