Comments on: Federal Home Loan Banks Standing in for Commercial Paper Buyers

By: Anonymous

Anonymous — Thu, 01 Nov 2007 04:07:00 +0000

As a side bar FHLB of Chicago won’t pay a third-quarter dividend.

http://www.chicagobusiness.com/cgi-bin/news.pl?id=26970&seenIt=1

A bunch of interesting stuff including this….

“But regulators later determined the Home Loan Bank’s mortgage finance program, under which it purchases home loans from its members and holds those loans on its balance sheet, employed inadequate risk controls.”

By: Anonymous

Anonymous — Wed, 31 Oct 2007 11:58:00 +0000

stupid FHLB taking unnecessary risk. are they trying to add risky debts to themselves? trust me if those risky debts gone back, taxpayer will monetize those trouble. whooping 200 or 300 or 400 billion or more. as more and more bankers and hedge funds turn to FHLB for rescue. FHLB will monetize all bad debt. I mean taxpayer will monetize all bad debt.

By: Anonymous

Anonymous — Wed, 31 Oct 2007 05:28:00 +0000

Every empire collapses not by the external forces but rather by the internal rots and corrupts. Our govt believes we as a nation are too big to fail, that the world can’t afford to see us falling into hard time. Our corporations believe that they are too important to fail — they must be preserved at all cost– and so all losses must be socialized. And American citizen thinks he is from the mightiest country on earth and that should entitle him/her to everything on earth even at the cost of loss of lives of others (1M Iraquis and counting).

By: Yves Smith

Yves Smith — Wed, 31 Oct 2007 05:27:00 +0000

Anon of 1:17 AM,

Sorry for neglecting to include the link. It is now in the post. And yes, Bloomberg’s search is pretty bad. I went hunting for the article about Rubin posted later, and couldn’t find it by searching under “Rubin”. I had to go through my browser’s history to locate it again.

By: Anonymous

Anonymous — Wed, 31 Oct 2007 05:17:00 +0000

Yves,

Can you still access this article on Bloomberg? I've been searching for it and can't find it.

Thank you for posting it here.

ST

By: jan perlwitz

jan perlwitz — Wed, 31 Oct 2007 04:46:00 +0000

bob wrote:
“This is a f***ing outrage! Whoever is in charge of the FHLB should be fired immediately, if not shot! This is complete crap!”

Objections! I am against the death penalty. (Except for those people who make bad TV commercials.)

By: jan perlwitz

jan perlwitz — Wed, 31 Oct 2007 04:44:00 +0000

Well, that’s what I call bailing out, in contrast to what the Fed does when they lower the Fed Funds target rate. But what the heck! I don’t believe in free market capitalism anyway.

By: Citizen Bagholder

Citizen Bagholder — Wed, 31 Oct 2007 02:47:00 +0000

I am outraged, but I expected this. Our government is brain-dead.

I think Jim Rodgers made a timely call when he recently announced he was moving all his assets out of dollars.

By: Bernard

Bernard — Wed, 31 Oct 2007 01:42:00 +0000

One more thought:

We have an insane system.

We allow for freewheeling deregulated financial markets where everyone is free to take risks as they choose.

However, at the same time, the government provides a safety net to bail out everyone when the risk-taking turns out badly.

This is the government subsidization of risk. The more you subsidize risk, the more risk you will get.

This is INSANE. Such a system can only self-destruct.

By: Bernard

Bernard — Wed, 31 Oct 2007 01:13:00 +0000

This quote is absolutely pivotal:

``EVEN AAA RATED CREDITS were having a tough time issuing paper,'' Hermance said. ``It took EVERYBODY BACK to the Federal Home Loan Banks.''

Is there any theoretical limit to how much credit the FHLB can extend to these lenders if they are unable to rollover their debt??? Correct me if I'm wrong, but it looks like maybe the sky really is the limit.

When the credit market refuses to roll over debt, this would normally result in CREDIT CONTRACTION.

The FHLB is acting as a de facto central bank that is effectively nationalizing all of the debt in the country that the free market refuses to finance any more.

By performing this nationalization of debt, they prevent a reduction in the nation's total outstanding total debt.

Yves, I think you should maybe re-name your blog from "Naked Capitalism" to "Debt Finance Socialism".

Don't worry about extending credit recklessly: No problem, the government will take over your lender's credit for you!

That's what they're already doing in England with Northern Rock (to the tune of $30 billion), aren't they?

Lenders are happy, borrowers are happy, and everyone can keep going further into debt. It is the genuine socialist paradise that those Communists kept talking about. A society where all financial risks are socialized. A SOCIETY WHERE RISK NO LONGER EXISTS.

When we ALL HAVE TO WORRY is when the government's foreign creditors refuse to roll over ITS DEBT. That's when we will all re-learn the meaning of risk.