Friday, August 17, 2007

The Fed Blinked.....Let The Bailout Begin.....Got GOLD :-)

Golden times ahead.... Things must be really ugly ( read Bank Run on CFC )...... First higher than usual repos, then taking MBS as collateral for the repos, now the discount rate cut, next week...... Havn´t found the word "CONTAINED" in the release :-)

Goldene Zeiten .... Die Dinge dürften wirklich nicht zum Besten stehen ( siehe Bank Run on CFC ) ...... Zuerst die erhöhte Aktivität der Repos, dann die ungewöhnliche Maßnahme auch ABS als Sicherheit zu akzeptieren, nun die Senkung des Discountsatzes, nächste Woche.... Konnte das Wort "CONTAINED" nicht in dem veröffentlichten Text finden.... :-)

Thanks to Wall Street Follies

Fed Cuts Discount Rate to 5.75% to Ease Credit Crunch
The Federal Reserve unexpectedly cut the discount rate and said it's prepared to take further action to ``mitigate'' damage to the economy from the rout in global credit markets.

The central bank reduced the rate at which the Fed makes direct loans to banks by 0.5 percentage point to 5.75 percent. Policy makers kept their benchmark federal funds rate target unchanged at 5.25 percent. Today's action is the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S. Bernanke's first as Fed chairman.

``Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth,'' the FOMC said in a statement released in Washington. ``The downside risks have increased appreciably.''

The committee is ``prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets,'' the statement said. The Fed's Board of Governors released a separate statement announcing the discount- rate cut

Adding Funds
Until today, the Fed had been injecting extra funds into the banking system to meet rising demand for cash. That didn't help companies much in getting access to capital. The amount of commercial paper outstanding, a key financing tool, has fallen the most since the 2001 terror attacks.

The Fed said in cutting the discount rate, it was approving requests from the boards of directors of the New York and San Francisco district banks. Among the New York Fed's directors are JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, Lehman CEO Richard Fuld and General Electric Co. CEO Jeffrey Immelt.

Thanks again to Wall Street Follies

Via the WSJ Explaining the Discount Window
The discount window is a channel for banks and thrifts to borrow directly from the Fed rather than in the markets. Until a few years ago, the discount rate was set below the fed funds rate and loans were subject to numerous conditions. Banks were reluctant to access the window because it was associated with a stigma usually reserved for distressed banks. A few years ago the Fed overhauled the discount window to try and alleviate that stigma; the rate was then set one percentage point above the funds rate and subject to far fewer conditions. In spite of that, discount window borrowing has remained paltry. Discount lending averaged just $11 million in the week ended Aug. 15. Although that was up from $1 million in the prior week it was puny compared to the billions of dollars the Fed has regularly injected into the financial system through open market operations.

Fed officials hope that reducing the penalty rate associated with the window and lengthening the term of loans to 30 days from one further lifts the stigma and gives it a tool to supplement open market operations for reliquefying markets. Open market operations, under which the Fed buys and sells securities to adjust the supply of bank reserves and keep the federal funds rate on target, primarily operate through a network of primary dealers, some of whom are large banks. Thus, they have only indirect impact as a supply of funds for the thousands of banks that are not active in the money market. The discount window however is available to any bank or thrift, and the terms are easier than for fed funds loans. For example, banks may submit mortgage loans, including subprime loans that aren’t impaired, as collateral, and many probably will.

> The yield on the 10 year just spiked 9 points......

> Die Rendite der 10 Jahresanleihen ist gerade um 9 Punkte gen Norden gesprungen

Disclosure: Long Gold, Goldmines (HUI), NAK , Short KBW Mortgage Finance Index (including Countrywide), Homebuilder (Index), WCI, REITs (Index)
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Anonymous Anonymous said...

NOW I'm scared to death!!! Joen

7:08 AM  
Blogger jmf said...


it feels like this move could be designed to "rescue" Countrywide.

I would like to see the details how much & what & from whom the collateral is.

But there is no way the Fed will give any details

7:24 AM  
Anonymous Anonymous said...

I want to thank the ECB, the BOJ, the PBC, and others, for holding all those dollars until worthless, so that the Wall Street fat cats can keep the party going. We average Americans really enjoy building yachts for our common masters. Good job!

8:19 AM  
Blogger jmf said...


8:28 AM  
Anonymous Anonymous said...

Just in case you missed it.

2:29 PM  
Blogger jmf said...

Moin Edgar,

thanks. Indeed i missed it.

I was to a concert on Friday and i needed the entire Saturday to recover..... :-)

I´ve been waiting for this since i made the original post 10 days ago post.

11:59 PM  
Blogger jmf said...

The Daily 2¢ - The Trouble with Central Bankers
/ Paper Money

Central banks are stealing from the average citizen
/ Fleckenstein

3:31 AM  
Blogger jmf said...

Lee Adler has an
excellent and detailed view
on the latest move from the Fed.

4:59 AM  

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