Bad news, the Feds outstanding (unlimited) swap line draws were up $27.9 billion to $573.9 from last week’s report.
That’s a larger increase than the approximately 24 billion increase the week before.
This is not good.
Each increase gets us closer to the day when the Fed says ‘no mas’.
Causing the euro’s decline to accelerate as the eurozone faces collapse.
http://www.federalreserve.gov/releases/h41/Current/
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As per my previous discussion, Fed will never say, “no mas.”
If the quantities get big enough, even Congress will wake up and do it for them…
No way, the people tried to get congress to act differently on the bankers bailout and ultimately failed – did you miss that? Congress does not serve the people, too much power is concentrated in too few hands, they don’t really do anything their voting constituents want if thier lobbying overlords are deadset against it. The congress folks here will meet their counterparts in china and europe and the global megacorps company bosses and all have a nice round of golf laughing at their respective sheeples. Jim Baird do you really think congress is not influenced by factors outside of joe 6 packs vote – possibly even people from other countries and institutions thousands of miles away? come on!
Interesting article on the effects of foreign lending.
http://www.econbrowser.com/archives/2008/11/the_new_improve.html
“The answer begins with the observation that the GSEs and some international institutions also have accounts with the Fed. But unlike regular banks, these institutions earn no interest on those reserves, so they would in principle have an incentive to lend out any unused end-of-day balances as long as they earn a positive interest rate.
But that’s not a sufficient answer by itself, because there’s an incentive for any bank that is eligible to receive interest from the Fed on reserve balances to borrow those balances from the GSE at a rate less than 1%, get credited by the Fed with 1% for holding them, and profit from the difference. Why wouldn’t arbitrage by banks happy to get these overnight funds prevent the rate paid to the GSEs from falling below 1%?
Wrightson ICAP (subscription required) proposes that part of the answer is the requirement by the FDIC that banks pay a fee to the FDIC of 75 basis points on fed funds borrowed in exchange for a guarantee from the FDIC that those unsecured loans will be repaid. If you have to pay such a fee to borrow, it’s not worth it to you to pay the GSE any more than 0.25% in an effort to arbitrage between borrowed fed funds and the interest paid by the Fed on excess reserves. Subtract a few more basis points for transactions and broker’s costs, and you get a floor for the fed funds rate somewhere below 25 basis points under the new system.”
i don’t see a ‘problem’ that needs
‘solving’ by this FDIC fee?
the GSE’s are simply like all the non banks- you invest your cash with the highest bidder who fits your risk parameter?