Is Merrill's John Thain Worried The Fed's Investment Banking Window Will Be Closed In September?

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At a gathering of Wall Street dealmakers yesterday Merrill Lynch chief executive John Thain said he hopes the Federal Reserve will continue to permit securities firms to borrow from a new Fed facility launched amidst the implosion of Bear Stearns. We couldn't help but notice, however, that Thain seemed a bit worried that the Fed isn't going to keep the window open. To paraphrase a popular saying on Wall Street, "hoping" the Fed window stays open is not a strategy.
"I think it should stay available to the banks and investment banks -- the primary dealers. It's important that it does stay available," Thain said to the audience at the Wall Street Journal dealmakers conference at the posh Pierre Hotel in Manhattan.
It had been widely assumed that the facility would be continued after its scheduled expiration in September. But recently opinions have shifted, with some reading the recent warnings from several Fed officials as indicating the window will be closed. What's more, the investment banking community is said to be split on whether they should have continued access to the window. Goldman Sachs is said to be leaning toward opposing a move to make the borrowing facility permanent, and Lehman is said to support the move. Morgan Stanley reportedly takes a middle position, wanting to wait to see the kind of regulation that would accompany the window.
This is the first time we know of that a securities firm has gone on record with its support of keeping the window open. Thain's decision to take this stance seems to indicate that he is taking seriously the idea that the Fed will not keep the facility open beyond September.

Merrill's Thain Urges Fed To Extend Lending Deadline To Brokers
[Dow Jones]

Merrill CEO wants ongoing Fed access, rules reform
[Reuters]

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