Total FOMC Lending
My fishing buddy David Kotok has been detailing the various lending and credit facilities the Fed has been supporting. He just updated it to reflect the most recent cash infusion.
It is rather startling:
Factors Adding to Reserves and Off Balance Sheet Securities Lending Program
Tuesday, October 14, 2008 | 12:15 PM | Permalink
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Despite all of the “hand-wringing” over the “TARP”, it is really just an extension of the Fed’s “Off Balance Sheet Securities Lending Program”.
(And besides, who cares about TARP when Fannie and Freddie are buying the toxic stuff anyway?).
Posted by: D.L. | Oct 13, 2008 11:34:53 AM
D.L.,
nice points, no doubt. tellingly, the TARP, like the FedRes' actions, is covering, many, more than one Elephant..
sorry BR, this is only 'startling' to those that have stopped paying attention..
here's betting that Kotok is a good (at the min. avid) Fisherman, as well.
it should go unsaid, but, any Economist, worthy of the name, like any good Fisherman, knows, you have to watch the waters to know the Currents..
Posted by: Mark E Hoffer | Oct 13, 2008 11:56:30 AM
Barry, is it true that the gov't is getting only preferred shares (non-convertible) in exhange for the capital injections? Is there any reasonable defense for that? Do you think Paulson's (very recent) allegiances in the industry are affecting his judgment as to what's best for the taxpayers? Thanks for an excellent blog.
Posted by: jbd | Oct 14, 2008 12:40:15 PM
Who will buy the bonds that the world must unleash to pay for all these bailouts? None of the shit is paid for folks but the chart is pretty.
Posted by: SPECTRE of Deflation | Oct 14, 2008 12:47:14 PM
I had about a 45 minute talk this morning with my banker. Good man, very bright. I was so naive, it hurts me.
The bank my partners and I do most of our business with is one of 13 Five Star banks for the state of Tennessee.. 2 days before the initial House vote on the bailout, he was at a meeting with our congressman. Told him why he was against the bill. Congressman asked him to put his reservations in a letter..he did...congressman read the letter on the floor in the initial deliberations...voted against.
The night after the initial vote he is called at home with conference call...several congressmen and one of our senators. The pork that will be added to the bill is outlined to him. Lobbyist for the Tennessee Banking Association also makes pitch for why the new bill will be better. But pork as we would all call it, has become the theme of why the bill will now pass.
Industry lobbyists put what they want into the bill. Initial bill that Bush proposes (5 and 1/2 pages) becomes a 2 inch thick Senate bill (we looked at his copies in the office) full of pork. Our senator says could not have been passed otherwise.
Now our community bank at a disadvantage. What my banker calls costs of acquistion, or the cost of gathering money is still the same for him. Meanwhile, the costs for acquistion for his competitors, because the government has injected money, have decreased significantly.
He is turning away people who want cd's...!
He tells me every cd he writes here, he loses money on...and we talked for 15 minutes about how this massive injection of liquidity makes the intermediate term outlook opaque...he has no idea what we will look like in 12 months, and therefore his fiduciary duties as head of the bank prevent him from making big bets here...
Anyway, en sum, this is not particularly good news for your local well run community bank.
Posted by: Bruce in Tennessee | Oct 14, 2008 12:53:52 PM
Agree that a lot of paper will be issued.
We are probably going to get one of the softer sets of inflation data for some time this week, starting with what may be a very negative PPI tomorrow (think of recent oil price moves) and a soft CPI on Thursday.
That is likely to be short-term bullish for Treasuries and equities, but not so good for TIPS, and might trigger a substantial sell-off in gold and a modest rally in Treasuries. In my view that will provide an excellent entry point to go long gold and short long-term Treasuries.
Anyone know if LIBOR is moving? Any softening in muni yields or high yield rates today? How exactly is Paulson planning to prevent hoarding of cash by banks? Inquiring minds need to know.
Posted by: leftback | Oct 14, 2008 1:01:28 PM
@SPECTRE of Deflation
That punchbowl has been freshly respiked - please do not remove it from the party.
Posted by: Winston Munn | Oct 14, 2008 1:03:32 PM
all this crap talk about 'socialism' and the 'end of capitalism' is just makin me puke.
how you gonna have capitalism.. which in essence is people investing savings... when you allow the people to do that to be raped and thrown out on the street?
remember a huge percentage of the shareholders are retirees, pensioners, old folks like my aunt in a nursing home.. people who been saving for 10, 20, 40 years because they trusted in the system.
all this "let it crash they deserve it" talk needs to be called the crap it is.
Posted by: Bob A | Oct 14, 2008 1:09:00 PM
I agree the punchbowl has been refilled. As what point do we consume so much punch that we die of alcohol poisoning???
Posted by: fresno dan | Oct 14, 2008 1:09:30 PM
@ SPECTRE OF DEFLATION:
A lot of people will buy the bonds because they fear the SPECTRE OF DEFLATION.
Posted by: leftback | Oct 14, 2008 1:09:38 PM
Ben writes: "we will not stand down". Is he referring to himself? Is he under pressure to resign? Is he signaling that he should not put under pressure to resign
http://marketwarnings.blogspot.com/2008/10/bernanke-and-fed-goals-before-they.html
Posted by: les | Oct 14, 2008 1:28:53 PM
Charts pretty.
I'm still on the side of market green by close as bond money comes back in. Think a chess game is going on here as to how cheap they can start the collection.
Once the heard is moving the one way though each other will jump as they always do.
Think 2-3% up by close.
Posted by: John Borchers | Oct 14, 2008 1:31:22 PM
where to begin... the pump is primed, just wait til it starts flowing. there should be plenty of money to go around :)
remember, a rising tide raises all boats.
Posted by: karen | Oct 14, 2008 1:34:26 PM
Redbook report today:
http://www.nasdaq.com/asp/EconodayFrame.asp
"Year on year sales in the October 11 week for Redbook's tally were up only .5% for the worst reading since the calendar disruptions of Easter. Redbook said sales were concentrated in the basic consumables such as food. Retail sales for September will be posted tomorrow, and weak results, which are expected, are likely to seal expectations of third-quarter recession"
Posted by: Bruce in Tennessee | Oct 14, 2008 1:40:57 PM
So we injected $250 billion which bought what? Stock in the banks,fine. Market goes up 900 with the bond market in play. Tuesdy the market goes no where cause it is lost. the bond markets barely move after something like 3 trillion in worldwide liqudity is injected. Does anyone else see this as a warning sign? Japan chooses to not inject money, they have lived with financial problems for 10+ years, another warning sign? Does anyone else find what is happen to iceland to be a waring sign?
I called Dj below 9000 last week and 5300 before the end of the year.
I hope am overshooting. Cause I think it will be worse.
Long puts on all major financial
Call on mining stocks, gold and oil
Posted by: Robert | Oct 14, 2008 1:46:30 PM
leftback, LOL! They should fear a Weimar Style Bailout more, and history speaks for me on this issue. Let me state flatly that there is no way in Hell rates stay low. We may be able to sell them, but the days of easy money are over, and I don't care what Paulson says on the issue because the Bond Market is telling him to stuff it. The 10 Yr. Treasury auction was not good. 4.03% means an increase of 13 Tails on yield. In the last 10 days we had an auction that was 40 tails. Ask Barry how many times you see a 40 point tail. Hell, it's never.
Posted by: SPECTRE of Deflation | Oct 14, 2008 1:46:40 PM
leftback @ 1:09:38 PM
I, too, see the “specter of deflation”, but only for the next several months.
After that, though, comes the “specter of INFLATION”, as all of the past, present, and (no doubt) future fiscal and monetary stimuli will act to awake the “inflationary dragon”.
Posted by: DL | Oct 14, 2008 1:46:47 PM
One other item. In the FED'S latest statement on Non-Borrowed Reserves, the figure stands at -363 Billion Dollars, but not to worry they have a plan. Surely to God there has to be more ways to steal from the taxpayer.
Posted by: SPECTRE of Deflation | Oct 14, 2008 1:49:11 PM
http://washingtonindependent.com/12260/-feds-ballooning-credit-extensions
If you have not read this. please do so
Posted by: Robert Muncy | Oct 14, 2008 1:50:51 PM
Karen, all boats were lifted with Ike, but it sure didn't save them.
Posted by: SPECTRE of Deflation | Oct 14, 2008 1:51:11 PM
Do you hear that ticking Its the Bond Market ready to detonate.
Got Gold?
Posted by: MW | Oct 14, 2008 1:55:59 PM
Spectre, of course, you are right... very funny. Actually, about the only thing i'm firm on right now is not shorting this market at this level.
Posted by: karen | Oct 14, 2008 1:58:12 PM
"remember, a rising tide raises all boats."
Hmmmm...This may not be a best solution - I don't recall seeing that many poor and middle class boat owners....
Posted by: Winston Munn | Oct 14, 2008 2:01:08 PM
Folks, the $700 Billion Dollar Bailout was passed, but we must enter the auction market to pay for it. We will compete with the EU (1.8 Trillion Dollar Bailout) for all available capital. We have damn little left on the FEDS Balance Sheet that Isn't toxic. Over 4% on the 10 spells trouble. They people that work on Wall Street ALL know this information, but they don't want to speak of it. It's way easier to talk housing being Bush's fault then dealing with reality which is that every frigging asset class on Earth was inflated using leverage bets multiple times by various groups.
The Wall Street Barkers also know that notional on Derivatives is pure bullshit when the counterparty says no mas (I ain't got it pal). That is the truth!
Posted by: SPECTRE of Deflation | Oct 14, 2008 2:03:40 PM
yikes! see the front page of the LA times at
http://calculatedrisk.blogspot.com/2008/10/up-in-smoke.html
Posted by: karen | Oct 14, 2008 2:04:07 PM
