RBNZ given $15bn USD - WTF !!!

[icm63]

http://www.nzherald.co.nz/business/n...ectid=10539933

US Fed to lend NZ Reserve Bank $US15 billion

11:07AM Wednesday Oct 29, 2008


WASHINGTON - The Federal Reserve says it will supply New Zealand's Reserve Bank with up to $US15 billion, as part of its ongoing effort to break through a global credit clog.
Under the new "swap" arrangement, the US central bank will provide US dollars to the Reserve Bank of New Zealand in exchange for New Zealand currency.

Is this the same thing as the Bear Sterns CEO saying we are ok, we are liquid, and by Friday they are not !!

Maybe all the local banks have borrowed to much from foreign banks for mortgages in Auckland, and costs of this debt is about to skyrocket.

[Louie.G]

Re: RBNZ given $15bn USD from USA FED - WTF !!!

http://www.nzherald.co.nz/business/n...ectid=10539933



Is this the same thing as the Bear Sterns CEO saying we are ok, we are liquid, and by Friday they are not !!

Probably lol. I have long had a feeling that several NZ banks have been dabbling in fancy deals. On Monday the RBNZ told 2 NZ banks it would pay cash for mortgages, if the banks needed cash (sound familiar??). Today they announce a currency USD currency "Swap".

My feeling is someone in NZ needs USD to settle an impending USD account. Coincidences are rather fascinating things. NZ GDP is around 150 Billion USD so this is 10% of GDP. hmmmm.

Also, I was interested to see NZ on the list of one down 13 to go in EJs post today. I am one who believes it is rightfully on the list too.

[friendly_jacek]

Re: RBNZ given $15bn USD from USA FED - WTF !!!

http://www.nzherald.co.nz/business/n...ectid=10539933



Is this the same thing as the Bear Sterns CEO saying we are ok, we are liquid, and by Friday they are not !!

Maybe all the local banks have borrowed to much from foreign banks for mortgages in Auckland, and costs of this debt is about to skyrocket.

I think this is part of the action to lessen the shortage of $ in foreign banks. You know, one of the reasons $ went supernova recently. Is this effectively a part of $ devaluation? Don't know.

[tsetsefly]

Re: RBNZ given $15bn USD - WTF !!!

why is the fed interested in providing this money in dollars?

I dont see how it strengthens the dollar when you have to print it out first to give it...

[icm63]

Re: RBNZ given $15bn USD - WTF !!!

from Nouriel Roubini - RGE Monitor comments

The spread of recession and financial crisis beyond the U.S. to several other countries kills the appetite for foreign investments, driving repatriation. This leads to further currency depreciation in carry trade destination currencies – especially emerging markets which had over-hedged or under-hedged against USD strength. A stronger dollar may contribute to further commodity price declines as countries with weaker currencies are able to purchase fewer goods. By the same token, weaker non-U.S. currencies may sow the seeds of higher inflation in countries vulnerable to imported inflation. In an environment where high yield alone is no longer attractive, the combination of slowing growth and rising inflationary pressures may set up emerging markets for further punishment from currency markets.

if you are NZ Bank and you borrowed a tonne of money in USD base from a bank in Japan, and the NZDUSD crashed 20%, you now owe 20% more. So the lender to this bank may want a higher yield for the risk of the lending to you, thus a risk of mortgage rates rising in NZ...NZ has savings of negative 18%.... the rest is 101 economics, unemployment, and deep recession. House price crash !

The USA fed sees the risk, and is offering to help out the RBNZ to allocate funds to those trouble local banks, if required, to pay back foreign loans with USA Fed sourced funds, at real good rates. More debt, to solve a another debt issue.

[bpr]

Re: RBNZ given $15bn USD - WTF !!!

Source

Release Date: October 28, 2008

For release at 5:00 p.m. EDT
Today, the Federal Reserve and the Reserve Bank of New Zealand are announcing the establishment of a temporary reciprocal currency arrangement (swap line) to address ongoing, elevated pressures in U.S. dollar short-term funding markets. This facility, like those already established with other central banks, is designed to help improve liquidity conditions in global financial markets.

Federal Reserve Actions
The Federal Open Market Committee has authorized the establishment of a new swap facility with the Reserve Bank of New Zealand that will support the provision of U.S. dollar liquidity in amounts of up to $15 billion. This reciprocal currency arrangement has been authorized through April 30, 2009.

The FOMC previously authorized temporary reciprocal currency arrangements with nine other central banks: the Reserve Bank of Australia, the Bank of Canada, Danmarks Nationalbank, the Bank of England, the European Central Bank, the Bank of Japan, the Norges Bank, the Sveriges Riksbank, and the Swiss National Bank.

Here's a three month chart of the NZD's fall against USD.

This facility is good through April 2009, so, NZD is as good as USD until then, right?

[Louie.G]

Re: RBNZ given $15bn USD - WTF !!!

if you are NZ Bank and you borrowed a tonne of money in USD base from a bank in Japan, and the NZDUSD crashed 20%, you now owe 20% more. So the lender to this bank may want a higher yield for the risk of the lending to you, thus a risk of mortgage rates rising in NZ...NZ has savings of negative 18%.... the rest is 101 economics, unemployment, and deep recession. House price crash !

The USA fed sees the risk, and is offering to help out the RBNZ to allocate funds to those trouble local banks, if required, to pay back foreign loans with USA Fed sourced funds, at real good rates. More debt, to solve a another debt issue.

There is no problem, everything is fine,

Sept 30... A loooong time ago RBNZ said - http://www.rbnz.govt.nz/news/2008/3432764.html
"The banking system is sound in New Zealand, and we do not expect this to alter. Over the past year, we have announced a number of measures that will make it easier for financial market participants to maintain liquidity during a period of financial market disruption. While we believe these are sufficient, we are keeping liquidity support arrangements under review and will respond as appropriate"

Oct 30 ... It is still fine... but just in case it ain't??? http://www.stuff.co.nz/4743467a13.html and http://www.rbnz.govt.nz/news/2008/3473796.html
"Deputy Reserve Bank governor Grant Spencer said though there was no need to use the facility right now, "it is useful to have this capacity if markets become dysfunctional".
The Reserve Bank has introduced other measures to shore up banks' access to funding if international credit lines dry up. In May it announced it would take the banks' prime mortgages as collateral for credit.
Two of the big banks - ANZ National and Westpac - have packaged up the prime mortgages in the legal form required by the central bank.
The two other large banks are in the process of doing so."

If the current markets are not disfunctional, then what the hell are they???? and lets just hope that International credit doesn't dry up.

Most NZ Banks are owned by Aussie banks. If you look at the AUD/USD chart for the last 6 months you will see a fall there of about 30%.

NZ Banks are safe?? They gave "PRIME" 100% mortgages, to home buyers because House prices NEVER go down in NZ. My 19 year old daughter got a 120% loan cause there was a second house for security. Ohhh and they are not involved in any toxic securities. They might be greedy bastards, but they would never do the CDS thing??? Sorry, but I feel you will come to see that they have some "other" toxic debt too. And House prices have only fallen 5 - 10%. NZ seems, IMHO, to be passing through phase B in EJ's Housing Bubble Correction post.

The RBNZ is an Honest CB and THEY know how to handle this slight glitch... yeah right lol

icm.63, I think you are right on the button but will add one thing written in the Stuff.co.nz link above, which seems rather ominous to me, could you please enlighten me here as I don't understand banking very much.

"The Reserve Bank would swap New Zealand dollars or other currencies for US dollars and lend that to the banks which were charged a margin over a given international rate.
The central bank would pass those earnings on to the Federal Reserve so there was no cost to itself, Mr Hannah said"

Do I take this to mean that Uncle Ben, gets ALL the profits from this deal (opps sorry "Costs")??. What is the US worried about, just swap sh*t loads of money to stupid overseas bankers and reap in the profits. Ya gotta love Uncle Ben.

[vinoveri]

Re: RBNZ given $15bn USD from USA FED - WTF !!!

http://www.nzherald.co.nz/business/n...ectid=10539933

Is this the same thing as the Bear Sterns CEO saying we are ok, we are liquid, and by Friday they are not !!

Maybe all the local banks have borrowed to much from foreign banks for mortgages in Auckland, and costs of this debt is about to skyrocket.

It gets worse:
http://biz.yahoo.com/ap/081029/fed_credit_crisis.html

WASHINGTON (AP) -- The Federal Reserve said Wednesday that it will supply new lines of credit to the central banks of Brazil, Mexico, South Korea and Singapore to help those countries deal with the global credit crisis.

The Fed will provide up to $30 billion to each of the central banks. It is the latest in a series of "swap" arrangements where the Fed provides dollars in exchange for reserves of the other nations' currencies.
...

[FRED]

Re: RBNZ given $15bn USD - WTF !!!

Simple: modern day currency intervention.

No way the dollar is going to be allowed to go straight up for months on end short term.

Long term, the "problem" of a strong dollar takes care of itself.

[don]

Re: RBNZ given $15bn USD - WTF !!!

As the IMF and WB comes roaring back from the graveyard, can the Coalition of the Willing be far behind?;)

[tastudios]

Re: RBNZ given $15bn USD - WTF !!!

Is this inflationary?