Why it MATTERS to me is because the simple fact that the FED is able to create ex nihlo digital dollars for those it likes suggests that that power can be used at their discretion to do anything they deem appropriate. When one has such power - imagine if you or I had it - that power is destined to be used in ways that are inimical to the best interests of the people of the USA.
I could care less about the Fed taking credit risk.....except to the extent that if they were using their own (member banks capital contributions to the Fed) money to accomplish their purposes then I would be more accepting - for the simple matter that they would actually BE ASSUMING credit risk.
The profits the FED created could just have easily been accomplished by GIVING the participating banks $14 billion. Why go through the charade of loans, guarantees, etc. Just decide which banks need it and give it to them. That skips all the "sound and fury" and make it simplistic. If they took that approach, I wouldn't be happy either.
The profits that were created in this exercise were "dilutive" to everyone in the US's individual wealth. In my view....it's morally wrong.
Wall Street Breakfast: Must-Know News [View article]
This is good comment KWM3. Gengrich has talked about finding a path to citizenship for illegal immigrants. Here's my solution.
If you have been in the country more than 10 years than you get a path to citizen ship should you meet minimum requirements. Upon receiving your citizen ship, you will not be allowed to vote for 5 years and you will forfeit any moneys you have paid into Social Security - if any. You can accelerate your path to citizenship in any member of your immediate family serves in the Armed Forces of the USA.
Shares are surging early on, but, as TF Market's Peter Tchir writes, "More people just bought stocks than know what a central bank swap line is." The cost of borrowing for EU banks, for which credit lines have been seizing up, will fall over 50 bps. Bottom line, it's helpful but not a "real game-changer," says RBC's Michael Cloherty. (previous) [View news story]
Providing liquidity does not repair insolvency. Because the Fed and the EU may make credit more available doesn't make the debt burden lighter. It only means someone (the citizens of the world through their central banks) is willing to lend money to otherwise un-creditworthy soveriegns. You can restructure Greek debt. You can restructure Spain or Italy's debt, but the only thing that will make it go away is for it to be written off or to be repaid.
Wall Street Breakfast: Must-Know News [View article]
BlueOkie.....Then they will put Kerry and Waters on the same team for the next bill....it will be called the KerryWaters bill for the Wall Street Gang.
Wall Street Breakfast: Must-Know News [View article]
"Italy Facing Insolvency"
IMHO - Italy and the EU banks are already insolvent. Any ECB action will not make the debt go away.....unless everyone decides to write it off.
As a bank holding EU PIIGS debt....when I write down or write off debt, then I "recognize" the fact of the insolvency. And....there is a follow on impact. To the extent that write down affects my financial statements, I may become insolvent. When that is recognized, then the value of my bank stock goes down and all holders of UBS, HSBC, Dexia, etc stock....may face insolvency.
Larry....the Bloomberg report indicated that the banks profited to the tune of $14 billion from the $7.7 trillion that was secretely lent/etc. It's not my number.
Nevertheless, when the Fed agrees to pay interest on excess reserves and in an environment wher banks are willing to deposit excess reserves for risk free profits....then I say the Fed is a creator of bank profits.
That's where I got my stick. It may not be a great stick....but it is a stick nonetheless.
I am struggling trying to understand what form QE will take. Bernanke said in Jackson Hole that the Fed had basically run out of ammo, and that it was time for the Federal Government to stimulate via deficit spending (as if we weren't already deficit spending).
I don't see any political support for deficit spending at a level that would be "noticiable" in our existing economy.
The Fed has expanded it's balance sheet by basically buying "toxic" assets. I suspect they could be more aggressive, such as buying mortgage paper from banks. But in such a situation, so long as the banks are unwilling to lend or there is a continuation of a personal balance sheet recession where people are afraid and are trying to get their personal finances in order, there won't be any demand created and thus no bump to the economy.
Now....if banks have more unencumbered cash...then maybe they will deploy it in their trading business. If so, they will bump the markets and asset prices will go up, but they will not be supported by fundamentals.
We May Be Much Closer To A Defining Moment Than Monday's Market Rally Would Suggest [View article]
Marketman....just a partial parsing....there is no way to "bail out" debt. They can paper over, re-lend, do what the Fed did with their $7.7 trillion, but it doesn't make the debt go away. They can inflate it away, but there is an "equal and opposite reaction" concept at play here some how. What ever they do will not be without an "equal and opposite reaction" of some sort that will produce some corresponding level of harm.....even if it is distributed throughout the whole world.
We May Be Much Closer To A Defining Moment Than Monday's Market Rally Would Suggest [View article]
Webmind....let's put it this way. We have demonstrated over a long period of time that the world, world leaders, and those who are supposed to make decisions in behalf of the people ...... constantly get it wrong, constantly make mistakes, and constantly think that they can pull one over on the people. Let's not forget that WWII was a mere 70 years ago.....and let's not forget that the US went into Afghanistan AFTER Russia pulled out demonstrating a dismal failure.
The other thing to remember is that as much as we'd like, we can't control the response of people to the reality they see. For example, in my view we are a simple heartbeat or two away from a bank run. It wouldn't take much.
So....after reading all the comments, then the next question I have is this.
If the Fed can employ this strategy in times of a banking crisis, then .... why should any bank fail in the USA, where the Fed stands as the creator of liquidity and profitability by simply lending to the bank in crisis sufficient to allow them to earn profits on spreads?
Blueline....the MMT mantra is that it will only cause hyperinflation if the economy is at full capacity. When there is unused capacity, it's just like putting a spark plug in cylinders 7 and 8 to get them running again and supposedly will not create hyperinflation, because excess capacity will be engaged, people will be hired and stuff will be created that will be sold to those who are hired, etc.
GRiver....but don't those individuals "deposits" allow the banks to multiply loans. If they withdraw, then loans would have to decrease by the multiplier. Are you saying that businesses are the major source of banks deposits?
Sobering statistic of the day: Corelogic reports 22% of all residential properties with a mortgage stood with negative equity at the end of Q3. The tally of 10.7M properties underwater marks only a mild improvement from the 10.9M at the conclusion of Q2. [View news story]
Pres. Obama's exhortations today that his administration is "ready to do our part" in resolving Europe's debt crisis likely will amount to little more than moral support, despite cynical finger-wagging from the likes of Zero Hedge. Republicans and Democrats alike are opposed to any U.S. bailout of Europe, with almost no chance that authorization for funding could get through Congress.[View news story]
"almost no chance that authorization for funding could get through Congress. "
Apparently according to the story today, the Fed doesn't need anyone's approval to lend money to anyone. I wish they would lend me a trillion at 0% interest. I think I could make a little money under that kind of a deal. I'll bet I could make more than $13 Billion, which is what the banks made on their supposed $7.7 Trillion in loans from the Fed.
Next question. Where did the Fed get $7.7 trillion to lend. Obviously this was not all at once and represents a cumulative total of loans that were lent, repaid and lent again and again. Nevertheless, the Fed's balance sheet prior to the crisis was (if I recall correctly) on the order of $700 billion.
It's one thing to consider that someone pulled this money out of a vault somewhere and lent it to the banks. It's another thing to consider that the Fed simply deposited digital balances in the accounts of these banks, which were created out of thin air. Which was it, and if it was something created out of thin air, then what stops the Fed from depositing digital balances in their favorite bank's account or their favorite senator's account?
Important Story On Fed Actions [View article]
I could care less about the Fed taking credit risk.....except to the extent that if they were using their own (member banks capital contributions to the Fed) money to accomplish their purposes then I would be more accepting - for the simple matter that they would actually BE ASSUMING credit risk.
The profits the FED created could just have easily been accomplished by GIVING the participating banks $14 billion. Why go through the charade of loans, guarantees, etc. Just decide which banks need it and give it to them. That skips all the "sound and fury" and make it simplistic. If they took that approach, I wouldn't be happy either.
The profits that were created in this exercise were "dilutive" to everyone in the US's individual wealth. In my view....it's morally wrong.
Wall Street Breakfast: Must-Know News [View article]
If you have been in the country more than 10 years than you get a path to citizen ship should you meet minimum requirements. Upon receiving your citizen ship, you will not be allowed to vote for 5 years and you will forfeit any moneys you have paid into Social Security - if any. You can accelerate your path to citizenship in any member of your immediate family serves in the Armed Forces of the USA.
Shares are surging early on, but, as TF Market's Peter Tchir writes, "More people just bought stocks than know what a central bank swap line is." The cost of borrowing for EU banks, for which credit lines have been seizing up, will fall over 50 bps. Bottom line, it's helpful but not a "real game-changer," says RBC's Michael Cloherty. (previous) [View news story]
Wall Street Breakfast: Must-Know News [View article]
Wall Street Breakfast: Must-Know News [View article]
IMHO - Italy and the EU banks are already insolvent. Any ECB action will not make the debt go away.....unless everyone decides to write it off.
As a bank holding EU PIIGS debt....when I write down or write off debt, then I "recognize" the fact of the insolvency. And....there is a follow on impact. To the extent that write down affects my financial statements, I may become insolvent. When that is recognized, then the value of my bank stock goes down and all holders of UBS, HSBC, Dexia, etc stock....may face insolvency.
So the dominos are set to start falling.
Important Story On Fed Actions [View article]
Nevertheless, when the Fed agrees to pay interest on excess reserves and in an environment wher banks are willing to deposit excess reserves for risk free profits....then I say the Fed is a creator of bank profits.
That's where I got my stick. It may not be a great stick....but it is a stick nonetheless.
Buy Gold Ahead Of QE3 [View article]
I don't see any political support for deficit spending at a level that would be "noticiable" in our existing economy.
The Fed has expanded it's balance sheet by basically buying "toxic" assets. I suspect they could be more aggressive, such as buying mortgage paper from banks. But in such a situation, so long as the banks are unwilling to lend or there is a continuation of a personal balance sheet recession where people are afraid and are trying to get their personal finances in order, there won't be any demand created and thus no bump to the economy.
Now....if banks have more unencumbered cash...then maybe they will deploy it in their trading business. If so, they will bump the markets and asset prices will go up, but they will not be supported by fundamentals.
We May Be Much Closer To A Defining Moment Than Monday's Market Rally Would Suggest [View article]
We May Be Much Closer To A Defining Moment Than Monday's Market Rally Would Suggest [View article]
The other thing to remember is that as much as we'd like, we can't control the response of people to the reality they see. For example, in my view we are a simple heartbeat or two away from a bank run. It wouldn't take much.
So all in all.....I think we can fail.
Important Story On Fed Actions [View article]
If the Fed can employ this strategy in times of a banking crisis, then .... why should any bank fail in the USA, where the Fed stands as the creator of liquidity and profitability by simply lending to the bank in crisis sufficient to allow them to earn profits on spreads?
Important Story On Fed Actions [View article]
Important Story On Fed Actions [View article]
Sobering statistic of the day: Corelogic reports 22% of all residential properties with a mortgage stood with negative equity at the end of Q3. The tally of 10.7M properties underwater marks only a mild improvement from the 10.9M at the conclusion of Q2. [View news story]
Pres. Obama's exhortations today that his administration is "ready to do our part" in resolving Europe's debt crisis likely will amount to little more than moral support, despite cynical finger-wagging from the likes of Zero Hedge. Republicans and Democrats alike are opposed to any U.S. bailout of Europe, with almost no chance that authorization for funding could get through Congress. [View news story]
Apparently according to the story today, the Fed doesn't need anyone's approval to lend money to anyone. I wish they would lend me a trillion at 0% interest. I think I could make a little money under that kind of a deal. I'll bet I could make more than $13 Billion, which is what the banks made on their supposed $7.7 Trillion in loans from the Fed.
Important Story On Fed Actions [View article]
It's one thing to consider that someone pulled this money out of a vault somewhere and lent it to the banks. It's another thing to consider that the Fed simply deposited digital balances in the accounts of these banks, which were created out of thin air. Which was it, and if it was something created out of thin air, then what stops the Fed from depositing digital balances in their favorite bank's account or their favorite senator's account?