Ben Bernanke said this morning that the Federal Reserve is considering extending its emergency lending to brokerages into 2009. This seems to put an end to speculation sparked by the words of Treasury and Fed officials that the Fed might shut the program down this fall. But it's also a reminder that the brokerage borrowing window remains temporary. Indeed, Bernanke emphasized that it would only remain open if the current market turmoil continued.
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Posted by guest , Jul 08, 2008 11:46AM
Sure it's temporary... until all of that stellar collateral is once again worth the value it is allowed to be borrowed against (never). Keep gambling taxpayer dollars in leveraged institutions built to fail.
Posted by ab , Jul 08, 2008 11:55AM
I realized what he's trying to do, but what's the point of a temporary facility if everyone assumes it will be reopened whenever it's needed? Not to beat the dead horse of moral hazard, but shouldn't they either keep it open forever or just close it down?
Posted by FUNdamental , Jul 08, 2008 12:08PM
@ab - agreed. You ecourage firms to lever up for shareholders/employees to profit, but if it goes poorly the burden of their shitshow will fall to the taxpayers (again).
Posted by guest , Jul 08, 2008 12:51PM
Translation: Banks still haven't been able to raise enough capital and get to the point where they can be open and honest about all the stuff sitting on and off their balance sheets and where the marks are. We at the Fed still don't have a good plan in place to prevent a counterparty cataclysm. If we pull the facility we have little confidence that we won't all go down in a raging shitstorm so rather than pull and put back in an emergency (which would erode the confidence everyone has in us), we'll just keep it open until this either goes away somehow or we come up with an idea of how to not blow ourselves up. So anybody got any ideas?
Posted by guest , Jul 08, 2008 2:56PM
@12:51:
well said
Posted by StMarc , Jul 08, 2008 5:30PM
Once you pay Danegeld, you will never get rid of the Danes, Ben. I know we're all modern and shit now, but primitive sheep-herding hole-poopers knew that a thousand freaking years ago.
M