As expected, the Federal Reserve is extending the broker-dealer discount window. The special borrowing facility which was launched following the collapse of Bear Stearns was scheduled to terminate in September. Now the Fed says it will stay open until January 30, 2009. The discount window has been cited by folks like Pimco’s Bill Gross as the reason why he remains confident that Lehman, among other investment banks, cannot fail.
The Fed also said it will extend the term lending facility that has provided additional liquidity to commercial banks. What’s more, they added a longer term borrowing facility, allowing banks to borrow for up to 84 days. Previously, banks borrowing under the facility were limited to 28 day terms.
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
first, bitches.
… and the financials are up. I question the sanity of anyone who views this as a sign of improvement/stability.
heard that the fed will give out free mayo with every purchase at the window
How long will the Fed keep the Shake Shack window open?
I am shorting the Shake Shack
I am producing my own special edition mayo available in a size perfect for white-washing lungs or ovaries.
Shake Shack needs to serve mayo to survive
Congratulations, the US has now officially become Japan circa 1993.
The problem is the fed and every other government agency has become the house. And the house always wins. Merrill is up 15% over the last 2 days.
It is absolutely insane.
The ADP report said that the biggest gains in employment were in the service industry – could that be 2nd jobs people are taking? ADP also said that 5000 financial service industry jobs were added – anyone care to explain that.
I would be interested in hearing what others have to say about this…
Perhaps the increase in “financial service industry jobs” are the ramping up of FDIC.
The fed window is the only thing holding up some of these banks which in turn is contributing the projected 0.5 trillion decifit in FY09. However, the alternative might be worse. Having a bank such as LEH fail. They have millions of counterparties who would in turn be put into jeopardy. It is a very bad situation.
#9, I agree, this is totally insane!
The Fed, SEC, and the Treasury are letting guys like Bill Gross to make a killing with bank debts while squeezing the hedge funds out of the market.
Those 5,000 jobs in the financial services industry are probably phone operators, debt collectors, repo-man, mortgage servicers (not originators), credit card companies, personal loans, auto loans, etc.
No debt collection agency and mortgage servicers had foresaw the exponential rise in defaults and had to add staff to cope with the record volumes of defaults, restructuring cases, repo’s, and foreclosures.
Do I have time to create a shady B/D and take advantage of this “window” ?
Let them all go under. This is throwing good money after bad.
STOP IT with the Mayo posts. Annoying!!!!
Either comment on something that can add value or go back to dialing for a job.
#15 and everyone annoyed with the mayo posts…
Stop responding to his/her comments that is exactly what he/she wants you to do. If you ignore it then the person posting the comments will not get any reactions (which are exactly what he/she is after). So everyone annoying just STFU and it will cease.
Why the hell is it that the US Govt only seems to care about banks’ counterparty risk? I don’t remember anyone demanding an Enron bailout.
@11
I agree it is a very bad situation but then why does these financials continue to rally? Why do those stocks continue to rally. And don’t say that the financials are trading at really low p/e multiples becuase in order to have a p/e multiple i would assune you have to have actuall earnings.
@16 GREAT ADVICE!
Or how about Refco and their $500M in phony notes. Why didn’t they get propped up?
to #17: What about a Steak & Ale bailout? I want Treasury-backed Prime Rib Tuesdays!
@18
I have no clue why they are rallying. My guess is that people are speculating. The banks will be completely fine as long as the fed window is open…they basically have an unlimited amount of cash. People are buying at historic low levels because they know they won’t go under and when (totally hypothetical “when” BTW)a stabilization occurs these investors want to see a major appreciation in value. It is a great idea as long as the Fed keeps the window open and equilibrium in the financial markets is returned in the next 12 months.
These banks are all too big too fail!
nom nom nom
@ 17
did enron provide the means for lenders and borrowers to unite…allowing capital to move from areas of high concentration to low?
thats why enron didnt get a bailout…and the banker/dealers do.
you guys who are anti- MAYONNAISE just don’t get it do you ??
I hope the guy making all the mayo comments is a casualty in the next round of financial firings
@23 Ever heard of Enron Online? Enron acted as market maker and not a broker. At its peak, Enron Online was handling over $4B in notional volume per day.
I was trading energy when Enron collapsed and it was ugly.
It’s John Thain posting all the mayo comments
I think I remember reading something about a “moral hazard” somewhere.
Eh, I guess it was nothing. Carry on…
did enron ever syndicate debt
As near as i can tell “moral hazard” is a term that academics write papers about (like accountability and free markets)but really have no practical application in the “real world”.
@30: Was the Greenspan put just a theory too?
@29 No, not to my knowledge.
I’m not arguing that Enron or Refco deserved a bailout, rather that counterparty risk is everywhere and the current crisis isn’t a special case.
@ 30 NO it actually existed. As does the Bernanke put. Which goes to my orginal point that as long as their is a “fed chairmen put” free markets, accountability, and moral hazard are terms that ONLY have meaning in academic journals.
@33: Should we get ride of the Federal Reserve Andrew Jackson style?
I agree with you that we are not operating in a true free market (For the record, I am in favor of free markets). I just can’t see joe sixpack being able to handle the price corrections that come at the hands of the market. Everyone wants the government to step in and make everything alright.
Phill Gramm is right. We have become a nation of whiners.
I am not arguing that we should get rid of the Fed.
I am merely arguing that the “saving the financial instituions/system” has become the end game for the fed. And in this game ALL means are justified by the end.
Everyone does want the government to step in and make everything all right. The issue is NO ONE wants to pay for it.
Joe sixpack is probably pissed off that his tax dollars are going to bail out freddie mac when their CEO made $20 million last year. And he is 2x as pissed that the x-ceo of Countrywide walked away with $170m and now Joes tax dollars are going to bail out Countrywide courtesy of the “mortgage bill ” written by Bank of America (countrywide’s acquiror).
Joe sixpack is the ONLY GUY handling the current price corrections. He worked for GM in Detroit and has seen his job go, his house become worth 60% of what he bought it for (10 years ago), he cannot afford to see the doctor and he is now paying $4 a gallon for gas. Joe sixpack is legitmately begining to wonder where his bailout is……
Phill Gramm is a fucking idiot! And i a a pro capitalist conservative!
@35: I disagree that no one wants to pay for it. Joe sixpack and the rest of the AFL-CIO want “the rich” to foot the bill for all things government.
Given that 95% of all income taxes collected are paid by 50% of society, I would say that joe sixpack doesn’t have a lot of room to complain (the pikers that have negative taxes rates thanks to the EITC* have no room to bitch).
Anyone that lives in Detroit has themselves to blame. The UAW and the AFL-CIO kill those companies and their membership is made up of everyone in Detroit. They got what they deserved.
I find it hard to disagree with anything that Gramm said in the interview that got him demoted from McCain’s campaign.
* I do favor the EITC over traditional welfare.
@35. Of course no one wants to pay for it. Since when is that a legitimate reason for not taking necessary action.
@36 What you are saying is that the 50% of society that pays 95% of all taxes rank ahead of the other 50% when it comes to government bailouts?
So the CEO of Countrywide made close to $1 billion dollars (gross) in the last 6 years. Assume a 20% tax rate (for simplicity) and paid $200 million worth of taxes. The bailout of Countrywide will cost tax payers billions of dollars. Net, Net this guy gets away with hundreds of millions of dollars and the taxpayer gets to pay (literally) for the consequences of this CEOs (and many like him).
So the take away is it is okay to expect a bailout if you are at least a millionaire and do your whinning through lobbyists .
Which is exactly why i said accountability and moral hazard are merely academic theories at this point.
@35 good point!
@ 38
And how much $ did all of the employees of Countrywide make? I’d venture to guess it was more than Mozilo made, but hey, why look at both sides of the puzzle
@ 11 – Our esteemed Treasurer has given the millions of counterparties (at this point, more like hundreds) plenty of time to get out if Leh goes under. This seems more like a back-scratching exercise involving Dick Fuld and his cronies at the Federal Reserve. Embarrassing for the Administration.
@38: No. I am simply stating that the burden of paying for these bailouts only falls on half of society. Therefore, everyone might bitch about paying for it, but only half of us are actually paying for it.
39 makes a good point about total taxes paid by CF, both income and corporate.
The rich uses lobbyists and the poor use their union bosses. So what. Either way, the problem is our politicians and their desire to get involved in anything and everything.
In a perfect world, we would let the market dictate who lives and who dies. But we live in a world run by politicians so that isn’t possible.
Anal_yst i think that is a great point and not necessarily a seperate side of the coin.
However 99% employees are not compensated as visionaires or leaders. Thus they are not accountible in the same fashion that a CEO/CFO/CCO ect.
The point is that CEOs/COOs/CFOs/Board of director members get paid “millions of dollars” because they are suppossed to LEAD. They are paid to assess risk/reward. And when they make huge errors there should be consequences (other than getting the axe with a $170 million golden parachute). And then the purhaser of said company (BAC) gets bailed out by the tax payer for its horrible decision in buying CFC.
This isn’t some rant about the rights of workers. It is a rant about the fact that this one issue (granted way more complicated than that) “the survival of financial insitutions” is justifying some really horrible behavior on the part of CEO’s/regulators/governments ect. And i fear the cost is going to be beyond anything we could have imagined. And like the Iraq war i cannot help but wonder if we should be questioning whether the cost (not only in terms of money but in terms of what it says to bad actors) of this wholesale bailout of financial institutions is worth the cost. In this context Moral Hazard, accountaiblility are nice but meaningless buzzwords.
At the end of the day Joe/Jane sixpack will be stuck with the bill for this bailout and yet they still have no healthcare, $4 a gallon gas, a house that continues to lose value, and a national debt that by all accounts is out of control. Why shouldn’t they whine.
Anal_yst at the end of the day you and i got penalized because we are/were short “speculators” in “SEC protected financial companies” on July 17. But what happened to John Thain who knowingly misrepresented material fact on July 17? Why shouldn’t we whine? (personally i am going to get some wine).
Phil Gramm is a self dealing prick. While he was working for McCain he was being paid by UBS to lobby Congress about the U.S. mortgage crisis. During this time, “the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages He wrote the Enron loop hole and his wife was on the board at Enron. Phil Gramm is the defination of moral hazard.
Some heavy duty political debate going on.
A few fundamentals to remember.
1. Real wages have declined and housing values have declined in many if not most areas of the country. Thus, an average American who works and owns a house has seen his or her income and net worth slip back.
2. Financial retirement plans like 401(k)s have largely replaced pensions. Most 401(k)s have declined in value and the owners may not understand the fine points of finance but they understand the bottom line. The funding of survival in old age is a constant worry.
3. The cost of gas has become a nightmare and the cost of food, particularly the cost of milk, is a cause of concern for the average American with children.
4. People may pay different levels of taxes, but each person is entitled to one vote.
We all have to hope that whatever politicians successfully exploit the genuine frustrations of ordinary Americans are the least venal of the choices out there.
@43,
Well said… It definitely feels like “1984″…
“…Everyone is equal, some more then others…”
I wonder when the rest of the animals will decide its time to finally over through the pigs…
Spoken as a pig at the trough…
Oink…
I think Oscar Wilde summed up the old adage about Life and Art better then I can…
@44 That’s “Animal Farm”, but same author, and the point still carries!