M dub

Thain Calls Lewis a Liar: BofA Saga Continues

good blog edward. lewis wanted out with the mac though so he lost his credibility either way. when you're swinging for home runs there's going to be strikeouts.

Fed Creates Bank Margin Squeeze

Still trying to get my head around some of the point here. What does the prime rate have to do with a bank's lending model? Sure, some credit cards and heloc assets are still prime based, but most dollar banking is still libor driven. The curve is what it is, which is mostly due to quantitative easing on the long end, so dropping the front end makes a lot of sense to keep the curve upward sloping. The fed wants consumer rates down either way, for lower debt service to spur the economy. Banks have too many existing assets on the books and the fed is backstopping their funding, but they don't want new assets anyways. Sure, it screws fixed income folks but so would a depression.

The inflation and dollar comment are valid, and this has been the case for quite a while. Desperate depression avoidance, which has serious inflation/paper currency consequences.

Re the chinese: their investment is now pfd. equity....the only buyer of UST now is the fed so they will know if the Chinese are trying to unwind their positions (i.e not gonna happen). So all we need is new money.

Re: Money markets: The government is everything right now. There are no real "money markets", it's all fed and treasury risk now, which i don't think changes from 1% to .25% or lower.

Banks aren't going to lend but they weren't at 1% either, so again, the fed already said they will originate residential mortgages. The banks are irrelevant anyways, there is one relevant balance sheet.

So what is the point about the prime rate since its mostly there for perception? I think whats happening in the libor markets and mortgage markets is more relevant.