Loading ...“It’s FED’s REPO Stupid”
Why market keeps going without normal corrections??
Why 2008-2009 style crash has not repeated despite liquidity problem?
“Some readers may remember the $700 billion Troubled Asset Relief Program (TARP) that was created to purchase the “toxic assets” that were supposedly “clogging” the financial system and dragging the Wall Street banks towards insolvency. Originally, that program was rejected by Congress which triggered a panic on Wall Street sending stocks into a steep 700-plus point nosedive. Following that bloodletting, the Fed decided to bypass Congress in the future and, instead, usurp extraordinary powers it was never intended to have. And since the Fed has never been challenged on the matter, it has made the brash assumption that it can meddle in the markets whenever it chooses printing as much money as it likes.”
“When the nonpartisan investigative arm of Congress, the General Accountability Office (GAO), tallied up the cumulative total that the Federal Reserve had secretly sluiced to Wall Street from December 2007 through July 21, 2010, it came to $16.1 trillion. But the GAO did not include all of the programs that came out of the New York Fed. When those other programs are added, the Levy Economics Institute, using the Fed’s own data, arrived at the tally of $19.559 trillion to the Wall Street trading houses and another $10 trillion in central bank liquidity swaps, bringing the bailout figure to over $29 trillion.” (“Fed Repos Have Plowed $6.6 Trillion to Wall Street in Four Months”, Wall Street on Parade)”
“So “over $29 trillion” was shoveled into the banking system without congressional approval and without the American people having any idea of how they were being finagled. We should probably expect the same underhanded goings on in the current crisis, in fact, that looks to be the case. The Fed is not going to acknowledge what it is doing and the media is not going to publish the details. It’s a conspiracy of silence.”
Ratio of Libor3 to 3 months T bill warning made FED alarmed;
Ww 29 Trillion….wow
But I suggest it was 29 Trillion well spent if it prevented a financial meltdown which would have wiped us all out
I agree only if it has finally solved the market liquidity problem.
The day REPO is withdrawn what will happen is the ??
Tower of Babble.
Watch the space.
Was it?
It really only fed the moral hazard represented by The Fed Put.
Which has now grown implicitly MUCH LARGER.
So perhaps it will take 100 or 200 Trillion in QE to bail out the system this next time. (and might not work).
Because at these low rates … “investors” COUGH COUGH have taken out multiples more in leverage to generate their target yields. The repo pipes are backing Hedge Funds and Speculative Finance mostly.
The right answer .. in hindsight … would have been let investors lose, and bankers lose, back with Penn Central or Continental Illinois or LDC debt back in the 70s and 80s. But these chaps play Politics, not banking, and play for the short term not the long term, so
HERE WE ARE.
They should have allowed folks to take hits when there were fewer chips in the pot.
And then the whole system would be WISER TOO.
Instead, now its STUPID STUPID STUPID 24×7 … the manic bubble machine … TSLA anyone?
Excellent Pedro!