EJ, have you seen this?

[Mega]

http://www.greenrushcapital.com/greenrush_fed2.pdf

Very strange, Very Worrying!
Mike

[icm63]

Re: EJ, have you seen this?

Apparently the FED has allowed the ratio of deposits to funds lending slip, and that short term cash can be borrowed from the FED via the TAF, to cover the short fall. This does not mean the banks capital has eroded to ZERO. This is not an bank insolvency chart.

It may mean as savings interest rates are so low that banks cant attract deposits from the public, so banks are using the money from the FED TAF service. I think this is a sign that the FED is really worried about deflation.

I like you, I dont understand why there is not more on this on the general media

I have been reading in other forums.

http://market-ticker.denninger.net/2...ks-out_03.html


http://www.elitetrader.com/vb/showth...6&pagenumber=1

http://www.elitetrader.com/vb/showth...hreadid=116240

[icm63]

Re: EJ, have you seen this?

I have found the final world the matter..its a red herring..

http://piggington.com/bank_reserve_r...ts_and_the_taf

There's a post, apparently from someone over at Calculated Risk, that's posted in the middle of the thread that's approximately correct. (Most importantly, the poster correctly points out the difference between "liquidity reserves" and "capital," two very different things.)
I'm not going to go through all of the balance sheet math here because it would take too long and wouldn't accomplish very much. Suffice it to say that banks have five major sources of funding for loans: (1) Common Equity, (2) Trust Preferred and Sub Debt, (3) FHLB Borrowings, (4) Other "Fed-related" borrowings (such as the TAF, currently), and (5) Deposits. If the rates offered through the FHLB system or the TAF are as good or better than the terms that would have to be offered to depositors, then many banks will go with the past of least resistance - FHLB borrowings or the TAF. Remember, deposits not only cost money from the rate side of things but you also have to pay employees, etc. to process them; that is, deposits are "operationally expensive." Sometimes it's just cheaper and easier to use the "government's money" (for lack of a better term), especially when Fed is practically throwing the money at them.
Merely the fact that the banks are availing themselves of the opportunity to use these funds doesn't mean a whole lot. Nor is it really meaningful to look at liquidity reserves in relation to these funds. If the government gives warning that these funds will no longer be available as of "x" date, the banks will just raise deposit rates, take in sufficient deposits and repay the borrowed funds. Yeah, they'll see a margin squeeze, but it's not the end of the world.
Look, the regulators understand liquidity really well. This is a non-issue in the aggregate. The REAL issue is with capital and solvency. And regulators aren't particularly good at that because it's hard to analyze a loan portfolio that you didn't underwrite yourself or a complex MBS portfolio that you didn't purchase yourself. Liquidity will only become an issue AFTER more capital/solvency issues crop up, as in the recent case of Countrywide.
People should keep their eyes on the losses in the loan and securities' portfolios. These FHLB/TAF borrowings, while not entirely unimportant, are a red herring.

************************************************** **
BUT THIS IS STILL A GOVT FUNDED SUPPORT FOR BANKS, as the margin they make on TAF funds is more than the would make on public deposits. So welfare for the banks..poor them !!

[rabot10]

Re: EJ, have you seen this?

http://www.greenrushcapital.com/greenrush_fed2.pdf

Very strange, Very Worrying!
Mike

Mike just keep your money out of the banks ok

[Verrocchio]

Re: EJ, have you seen this?

Apparently the FED has allowed the ratio of deposits to funds lending slip, and that short term cash can be borrowed from the FED via the TAF, to cover the short fall.

ICM63, you're substantially correct, at least in agreement with some of the sharper tacks in the box. This phenomenon has been noticed and discussed in another forum: iTulip.com Forums > Topics > Financial Markets
Horrifying h3 fed data: Banking system officially insolvent?
Fred replied that Dr. Hudson and Dr. Atlee were asked to interpret this, and they said that:

1. the net non-borrowed reserved indicated that the banks were not willing to borrow from one another, and
2. total borrowings from the Fed showed that the Fed was willing to make up the difference.

[Mega]

Re: EJ, have you seen this?

Rick, you got to keep it some where.
Mike

[Guest]

Re: EJ, have you seen this?

Rick, you got to keep it some where. Mike

Mattress. Nice crinkly paper notes. Sleep good.

[Mega]

Re: EJ, have you seen this?

Not if you put a whore in your bed!
Mike

[pococansado]

Re: EJ, have you seen this?

http://www.bloomberg.com/apps/news?p...d=a7EAJelhvLh0

[Jim Nickerson]

Re: EJ, have you seen this?

http://www.bloomberg.com/apps/news?p...d=a7EAJelhvLh0

The first time I saw those charts, here somewhere, I uttered out loud, "holy shit!". The article you put up, pococansado, is the best one I've seen that clarifies the charts.

Welcome to posting on iTulip. Good work.