Fed to Lend $20 Billion to Banks.

Fed to Lend $20 Billion to Banks.

money.cnn.com

The Federal Reserve announced Wednesday that it was lending $20 billion to banks in the first of four special auctions designed to help alleviate the credit crunch on Wall Street.

The Fed said that it received requests for $61.6 billion in loans from 93 bidders - illustrating strong demand by banks who need short-term funds. The winning bidders will receive their loans, which will mature in 28 days, on Thursday.

(visit the link for the full news article)

The Fed gets a request for 61.6 billion in aid, and they give out $20 billion. Anyone left that still think the markets are OK?

Many banks had been wary of borrowing money at the Fed's so-called discount rate of 4.75 percent because it is higher than the federal funds rate of 4.25 percent. The federal funds rate is what banks charge each other for overnight loans. The Fed lowered both rates last week by a quarter of a percentage point.

In addition, market observers feel that there is a stigma attached with borrowing at the discount rate because it may be a sign that banks are so desperate for short-term cash that they are willing to pay the higher interest rate for the funds.

money.cnn.com
(visit the link for the full news article)

[edit on 12/19/2007 by Rockpuck]

I wonder if I could get about $150k of that, sure would make life a little easier for me...


Is this really going to help, aren't we just digging a hole, deeper and deeper?

reply to post by elevatedone


Haha, yeah I don't think they would even notice 150k missing out of 20 billion, its chump change to them.

What I find MOST concerning.. is that this operation was actually set up with SEVERAL other countries, the biggest being the UK. In the UK they are not even putting a limit on how much can be borrowed, instead they opened a unlimited loan to any bank that will pay 4.2% for the loan. But banks all over the world are pushing more liquidity into their markets this week trying to "make it easier" on them because of increased write offs of assets due to the credit collapse.

This is not an American problem, and if it heads to a recession, it will not be an American recession.. this is a world wide issue, some countries worse off then others but I think it's safe to say we are all in the same boat here.

Originally posted by elevatedone
Is this really going to help, aren't we just digging a hole, deeper and deeper?

That's exactly what I was thinking. It's like lending money to a drug addict. The PROBLEM (the fact the banks desperately need to borrow in the first place) needs to be fixed first before any borrowing can solve problems (unless the borrowing of these monies will do this).

What I don't get is the fact that many of these big banks are supposedly worth $Billions and make even more $Billions in profit each year, but are unable, or is it unwilling, to take the hits. If they are taking short term loans from central banks to cover losses (due to their own mismanagement and ludicrous business decisions), how do they intend to pay the loans back when they become due?

I get the impression the banking industry is looking at government bailouts, rather than taking hits on their own profits.

I wonder exactly how much non-existent money has been lent to the worlds banks over the last month or so?

Anyone keeping a tally?

Gold gave money it's value, but money has not been attached to gold since the 1970's.

Inflation is an increase in the stock of money, not price rises.

it is impossible to "debauch" Gold itself. But debauching money is not difficult at all. Both the Greeks and the Romans "clipped" their Gold and silver coinage - they began to mix more and more base metals with the Gold and Silver in their coins. Marco Polo brought to the West the first stories of paper money, introduced by Kublai Khan and made from the bark of the mulberry tree. Bankers, who were originally Goldsmiths who stored Gold for other people and charged a fee for their services, began to issue paper "receipts" for the Gold. As these receipts became more widely acceptable in exchange, the idea of "paper money" was introduced. Of course, the bankers couldn't resist. They began to issue more "receipts" than they had Gold with which to redeem them. And one of the first things that these bankers did with this "excess paper" was to lend it to Monarchs, and to early governments.

www.the-privateer.com...

reply to post by Britguy


It's these really big banks that actually make the orders for more money to be made that give out the loans.

The customers eventually pay the loans back ultimately, and even the money that is generated by the interest must be ordered into the financial system by the really big banks.

This generation of money is the real definition of inflation, but seeing as there will be more money available, businesses raise their prices which we, the customers, are led to be believe is the inflation.

It would measure in the trillions, hell $500 billion loaned by the EU to EU banks today alone.

But the hidden message in the Fed loans is that it means the banks REALLY need the money.. otherwise they would be borrowing from other banks at a much lower interest rate, which is 4.2% compared to the Fed at 4.7%

Shame I could never get interest rates like that. My credit cards went to 24% for absolutely no reason last month. Good credit, and Chase couldn't give me an answer, yet refused to change it.

Banks. Perhaps the entire institution of Banks should be abolished.

Interesting news article, but I cannot help thinking that the head line should read;

"Federal Reserve to magically create $20 Billion out of thin air, to bail out mismanaged banks, whilst further devaluing the dollar and making the taxpayer pay the bill for the banks financial incompetance."

I guess I am a little bit jaded as the Northern Rock fiasco in the UK is to cost every taxpayer in the UK £1800, about $3600. Just like in the UK, the US taxpayers will have to pay for private corporations failed financial speculations. I have put a link below for the Northern Rock example.

www.telegraph.co.uk.../news/2007/12/19/nrock119.xml

"The winning bidders will receive their loans, which will mature in 28 days"

-------------------------------------------------------------

what in the world makes anyone think that things will be any better in 28 days? IF anything, I imagine things will be worse, since these banks will have to pay back this money along with the interest...but they will more than likely be in the same position they are in today, or maybe worse. So, they'll have another auction, so the banks can borrow the money they owe from this auction, plus the interest, so they can pay it back?? And another, and another...till finally the bank that has our money deposited into it will owe twice as much as it's susposed to have to cover our deposits, and well, sorry folks, the fed wins out.....you have no money???
Am I reading this right, or are our banks on the path towards bankruptcy? In which case, I imagine we can kiss our holdings in the bank goodbye, or well, be content with the idea that our fine government.."we, the people".. will give us the money that the banks owe.

Bankruptcy is an illusion.

Money is worthless. It only has value because we continue to believe it has value. When the world gets short of money, or countries or situations need to be controlled, the big banks fix the accounts and print off more new money which they lend out with interest.

But more money has to be made and put into circulation to pay back the interest, hence inflation.

When we all realise the actual true value of money and stop using it, then the world be free of poverty. The longer we go on believing in money, the longer the elite will control us.

If everyone ate an apple and planted the seeds anywhere they chose, then there should be enough apples for everyone. An apple grows free from a tree that is free. We take the apple and give it value above it's true form and we sell the apple for profit.
The true value of an apple is to stop hunger and grow more trees.

Originally posted by Rockpuck
It would measure in the trillions, hell $500 billion loaned by the EU to EU banks today alone.

**************

Perhaps the entire institution of Banks should be abolished.

yes, on the 19th (of Dec) the ECB European Central Bank
made available funds worth 500 Billion to he member and commercial banks in the EU.

weeks before the US Federal Reserve made $20+ billion available
to EU & Swiss banks that have joined in a cooperative agreement
between those Central Banks and the U.S. Central Banks


the Federal Reserve in the U.S. has incrementally doled out funds,
(thru extended loans or other creative ways) $20bn, $40bn, $40bn ++
the total is somewhere near $100-120bn.



but what get me is that the buzz word is these funds are for Liquidity

and that is a False excuse... the release of these extreme ammounts of monies is because
most of the member banks, commercial banks, and investment banks (Merrel lynch, etc)
are by all standards "Insolvent"




under the banking rules, these lenders have no money to lend
as the collateral (SIVs, CDOs, hedge positions, toxic mortgage paper)
they hold is virtually worthless because nobody will buy that next to
worthless paper the banks reason have value.
The Fed is buying the worthless mortgage & credit paper which the banks are obliged to Buy-Back at the time their Fed loans expire.
the banks hope that a flood of re-mortgage loans will be made
and they will make enough money to repay the Fed in those 28 & 90 day loan periods.




here is one interesting piece on this monetary situation:

larouchepac.com...



.........................



Your second remark, although the banks won't be abolished---
they should undergo a major restructuring...



there's an article
that deals with: "Global Banks embrace Islam"

i see in the near future, where the general population will have available
banks that operate under something strict like Shari'a Law
for the common folk and capitalist banks, with inherent risk
would be in the domain of the rich & investor class.

~think in terms of S&Ls as one class, investment banks as aother class,
commercial banks as another class of bank/institution
and a 4th level of banks that operates under very strict rules and
can't buy mortgages or hold debt paper as collateral.~

see: www.augustreview.com...

click on article : ( Global Banks Embrace Islam )


thanks