We need to keep a comprehensive federal money list

[rj1]

By comprehensive, I mean all money that has been sent out or promised by the Fed and/or government in response to this crisis that started last summer with the Bear Stearns hedge funds and only that. Feel free to add on or change over time, that's the point.

And please, keep out the editorials. Let's just keep facts and numbers.

March 16th, 2008: Fed promises $30 billion to cover the downside of J.P. Morgan's buying Bear Stearns

March 14th, 2008: Fed gives non-recourse loan via J.P. Morgan conduit to Bear Stearns from the discount window for Bear Stearns collateral, value unknown

March 19th, 2008: OFHEO allows Fannie Mae and Freddie Mac to spend $200 billion more in the mortgage-backed security market

March 11th, 2008: Fed gives $200 billion by offering to take mortgage-backed assets in exchange for treasuries.

Should liquidity injections from the Fed last year count or are those normal?

[blazespinnaker]

Re: We need to keep a comprehensive federal money list

Well, are these really money list or loan lists?

If you want money lists, then look at the federal debt. That is a money list. As the US government auctions off more treasuries, they are putting more money into circulation.

The fed actually just expands and contracts the 'looseness' of credit. And, in fact, the shadow banking system is probably more of a factor than the fed (or at least was).

People talk about the fed running 'printing presses' ... in fact, they do no such thing. What they do is underwrite the printing presses at the treasury (which is congress / president's fault).

They're always getting blamed for something that really isn't their fault. I guess what is their fault is that they let Congress get away with it. But, really, it's not up to the fed to decide who pays what, but rather the voters (americans in general, the ones that complain about the fed). They're just responsible that the whole kit and kaboodle doesn't go south when American's spend more than they have.

Kind of like the doctor that heals the patient who's abusing drugs after drugs after drugs. He knows he shouldn't waste his time and should just let him keel over, but it is his job so he just does it.

[rj1]

Re: We need to keep a comprehensive federal money list

Well, are these really money list or loan lists?

If you want money lists, then look at the federal debt. That is a money list. As the US government auctions off more treasuries, they are putting more money into circulation.

The fed actually just expands and contracts the 'looseness' of credit. And, in fact, the shadow banking system is probably more of a factor than the fed (or at least was).

People talk about the fed running 'printing presses' ... in fact, they do no such thing. What they do is underwrite the printing presses at the treasury (which is congress / president's fault).

They're always getting blamed for something that really isn't their fault. I guess what is their fault is that they let Congress get away with it. But, really, it's not up to the fed to decide who pays what, but rather the voters (americans in general, the ones that complain about the fed). They're just responsible that the whole kit and kaboodle doesn't go south when American's spend more than they have.

Kind of like the doctor that heals the patient who's abusing drugs after drugs after drugs. He knows he shouldn't waste his time and should just let him keel over, but it is his job so he just does it.

So what's the list I have above then represent?

[blazespinnaker]

Re: We need to keep a comprehensive federal money list

It's a loan list. The fed is making temporary loans so that banks don't have to do firesales and make this all the more worse.

Bear Stearns is not worth 2$ a share.

Unfortunately, in the middle of this financial crisis of confidence, banks can be very very vulnerable. Once there is a run on the bank, there is really nothing you can do, except a quick merger (not something anyone wants to do, because then the lack of confidence spreads like contagion) or backstop it by the government .. like Northern Rock.

The Fed/JPM tried a mix of both options. Interesting idea. You have to give hank/ben credit, they are on their toes.

[rj1]

Re: We need to keep a comprehensive federal money list

It's a loan list. The fed is making temporary loans so that banks don't have to do firesales and make this all the more worse.

Bear Stearns is not worth 2$ a share.

Unfortunately, in the middle of this financial crisis of confidence, banks can be very very vulnerable. Once there is a run on the bank, there is really nothing you can do, except a quick merger (not something anyone wants to do, because then the lack of confidence spreads like contagion) or backstop it by the government .. like Northern Rock.

The Fed/JPM tried a mix of both options. Interesting idea. You have to give hank/ben credit, they are on their toes.

Sorry. Was gone for Easter weekend and I happily did not touch a computer in that time. But thank you for taking the time to explain.

Would it still make sense then to make a comprehensive loan list?

[Ant]

Re: We need to keep a comprehensive federal money list

The fed actually just expands and contracts the 'looseness' of credit.

It seems to me that they're doing a good bit more than that. A 29B non-recourse loan against the worst tranche of BSC's toxic waste is not a loan, it's a subsidy. Or, more precisely, a put option. A financial asset with very real market value.

They're always getting blamed for something that really isn't their fault...
Kind of like the doctor that heals the patient who's abusing drugs after drugs after drugs. He knows he shouldn't waste his time and should just let him keel over, but it is his job so he just does it.

This is an extraordinarily generous interpretation. To me they look a little more like the doctor who continues to write a patient who is clearly an addict perscriptions for more Valium and Oxy in clear violation of their professional oath of conduct.

[hayfield]

Re: We need to keep a comprehensive federal money list

Good point. As William Poole has pointed out, the Fed provides liquidity, not capitol. These are loans, with (possibly suspect) collateral put up in exchange.

But to your point, the Fed only has $700B or so in treasuries to lend.

It's already made $200B available in the Term Securities Lending Facility. How much has been drawn down? Lehman, GS, and Morgan have been kind enough to "test" for a few $Billion.

There's also the TAF, discount window, and $30B collateralization to JP Morgan/BSC.

At this rate, will the Fed soon be tapped out?

How far can that $700B go to sustain The System, and what would happen if the fed reached the end of that rope?

Edit: $655B, down $43B from last week.

[c1ue]

Re: We need to keep a comprehensive federal money list

Hayfield,

It is nice to watch the public numbers, but keep in mind the Fed can always get the law changed.

I just read somewhere that the problem with billionaires getting shafted in business deals, is that they have the clout to just change the rules of the game.

Ditto for gov't.

[hayfield]

Re: We need to keep a comprehensive federal money list

Sure, no doubt the rules can be changed. But you're not suggesting we bury our heads in the sand and adopt a fatalist attitude, are you?

Anyway, rule changes in the middle of the game, even secret ones, become apparent after not-too-long thanks to the tireless analysts and observers who stand by their principles.

And of course if the billionaires change the rules, they risk destroying their paper currency. But if that happened, well, they have more to lose that most of us.

[quigleydoor]

Re: We need to keep a comprehensive federal money list

This money list sounds like the centerfold of Grant's Interest Rate Observer. Bi-weekly, $65 per issue.

[c1ue]

Re: We need to keep a comprehensive federal money list

Sure, no doubt the rules can be changed. But you're not suggesting we bury our heads in the sand and adopt a fatalist attitude, are you?

Never said to ignore the problem, but it is pointless to spend much time/effort on something when it is patently obvious something will happen.

The solution in this case is always to start defensive proceedings against the almost certain result.

That's why no more investments in US$ or in the US for me, other than my human labor input service business.

[blazespinnaker]

Re: We need to keep a comprehensive federal money list

Or, more precisely, a put option. A financial asset with very real market value.

Oh, absolutely. However, the real market value is not equal to the total loan, but a small portion of it.

[Ant]

Re: We need to keep a comprehensive federal money list

Quick link via WSJ before I head to work:

Guide to Fed's Alphabet Soup

Getting your OMOs confused with your TAFs, PDCFs and TSLFs?

The Federal Reserve’s alphabet soup of innovation is running over the side of its bowl with the central bank’s new programs designed to prevent economic disaster. (Or at least prevent more of a disaster than we have now.)

The FRBNY (i.e., Federal Reserve Bank of New York) has just published a handy chart outlining the eight ways a bank or investment firm can borrow from the nation’s lender of last resort. Five of them were created since last summer:
# Term Securities Lending Facility (TSLF), announced March 11, allowing securities dealers to get Treasurys at auction for 28 days
# Primary Dealer Credit Facility (PDCF), announced March 16, for securities firms to receive overnight loans
# Term Auction Facility (TAF), announced December 12, for banks to get funds at auction without the discount window stigma
# Single-Tranche OMO (Open Market Operation) program, announced March 7, allowing securities dealers to get 28-day funds
# Term Discount Window Program (we haven’t seen the TDWP acronym yet), announced August 17, extending the length of discount-window loans to 90 days

http://www.newyorkfed.org/markets/Fo...ed_Lending.pdf

http://blogs.wsj.com/economics/2008/...alphabet-soup/