Comments on: The Fed Says Its Collateral is Fine, Thank You Very Much http://www.nakedcapitalism.com/2008/02/fed-says-its-collateral-is-fine-thank.html Mon, 23 Nov 2009 01:53:25 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: eTrader http://www.nakedcapitalism.com/2008/02/fed-says-its-collateral-is-fine-thank.html#comment-4473 eTrader Tue, 26 Feb 2008 00:23:00 +0000 http://www.nakedcapitalism.com/2008/02/the-fed-says-its-collateral-is-fine-thank-you-very-much/#comment-4473 I'm just wondering how those banks describe the TAF money on their balance sheet. It should be categorized as "short term debt". If the banks roll over TAF this month, the amount will be shown up their balance sheet. <br/><br/>This is not desirable situation for the banks. They wanted to borrow from Fed anonymously.<br/><br/>And it brings one question: Do banks roll over TAF this time?<br/><br/>If they do, investors would realize which banks are insolvent without TAF.<br/><br/>If they don't, they have to go back to pre-TAF situation. Hello, LIBOR spread.<br/><br/>If none of banks shows spike of short debt, and if Fed's borrowed reserve keeps negative, the game would be over. I’m just wondering how those banks describe the TAF money on their balance sheet. It should be categorized as “short term debt”. If the banks roll over TAF this month, the amount will be shown up their balance sheet.

This is not desirable situation for the banks. They wanted to borrow from Fed anonymously.

And it brings one question: Do banks roll over TAF this time?

If they do, investors would realize which banks are insolvent without TAF.

If they don’t, they have to go back to pre-TAF situation. Hello, LIBOR spread.

If none of banks shows spike of short debt, and if Fed’s borrowed reserve keeps negative, the game would be over.

]]> By: max http://www.nakedcapitalism.com/2008/02/fed-says-its-collateral-is-fine-thank.html#comment-4468 max Mon, 25 Feb 2008 22:26:00 +0000 http://www.nakedcapitalism.com/2008/02/the-fed-says-its-collateral-is-fine-thank-you-very-much/#comment-4468 <i>However, officials believe they have tough safeguards in place.</i><br/><br/>For some reason this sentence does not inspire confidence. Anyone have any ideas why?<br/><br/><i>In addition, the US central bank accepts only a designated list of investment-grade securities and applies what it believes to be a conservative “haircut”.</i><br/><br/>Maybe this why it is crucial for them to shuffle the Ambac/MBIA situation for as long as possible, to maintain the appearance of the "investment grade securities". However, officials believe they have tough safeguards in place.

For some reason this sentence does not inspire confidence. Anyone have any ideas why?

In addition, the US central bank accepts only a designated list of investment-grade securities and applies what it believes to be a conservative “haircut”.

Maybe this why it is crucial for them to shuffle the Ambac/MBIA situation for as long as possible, to maintain the appearance of the “investment grade securities”.

]]> By: S http://www.nakedcapitalism.com/2008/02/fed-says-its-collateral-is-fine-thank.html#comment-4460 S Mon, 25 Feb 2008 20:09:00 +0000 http://www.nakedcapitalism.com/2008/02/the-fed-says-its-collateral-is-fine-thank-you-very-much/#comment-4460 is it me or is the annoucnement that the treasury reversed course and is now prodding the IMF to sell gold a bit suspicious. This is as clear and transparent an example of the Gov't trying to manipulate the market as I have ever seen. Think they are afraid of the technicals and the inflation concerns. Look for a scary PPI number tomorrow.<br/><br/>The TAFY auction opaqueness is against every free market convention the US espouses. Collateral requirments nothwithstanding, the fact remains that this information is critical to the efficient functioning of the capital markets, far greater in magnitude than the lame prosecutions for FD breachs. <br/><br/>The news about S&P eliminating watch on the monolines is yet another example of the now visible hand. Why would you play a game that is so overtly manipulated - another question the Fed/Tres hopes slips by the wayside. Is it any wonder the bulk commodity markets are seeing such massive flows, it apears to be beyond the reach of the visible hand. is it me or is the annoucnement that the treasury reversed course and is now prodding the IMF to sell gold a bit suspicious. This is as clear and transparent an example of the Gov’t trying to manipulate the market as I have ever seen. Think they are afraid of the technicals and the inflation concerns. Look for a scary PPI number tomorrow.

The TAFY auction opaqueness is against every free market convention the US espouses. Collateral requirments nothwithstanding, the fact remains that this information is critical to the efficient functioning of the capital markets, far greater in magnitude than the lame prosecutions for FD breachs.

The news about S&P eliminating watch on the monolines is yet another example of the now visible hand. Why would you play a game that is so overtly manipulated – another question the Fed/Tres hopes slips by the wayside. Is it any wonder the bulk commodity markets are seeing such massive flows, it apears to be beyond the reach of the visible hand.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/02/fed-says-its-collateral-is-fine-thank.html#comment-4459 Anonymous Mon, 25 Feb 2008 18:44:00 +0000 http://www.nakedcapitalism.com/2008/02/the-fed-says-its-collateral-is-fine-thank-you-very-much/#comment-4459 I thought all the kids in lake Woebegone had IQs of zero, to allow every other town to be above average. <br/>blueskies I thought all the kids in lake Woebegone had IQs of zero, to allow every other town to be above average.
blueskies

]]> By: Anonymous http://www.nakedcapitalism.com/2008/02/fed-says-its-collateral-is-fine-thank.html#comment-4432 Anonymous Mon, 25 Feb 2008 13:24:00 +0000 http://www.nakedcapitalism.com/2008/02/the-fed-says-its-collateral-is-fine-thank-you-very-much/#comment-4432 Implicit in the question of the quality of the collateral the FED accepts for its loans, is the question of the solvency of the FED itself. Granted that there is no prospect for the financial failure of the FED, the question remains what would the economic failure of the FED look like. Would there come a point when no private sector bank would be interested in accepting FRNs? And what would the financial and economic world look like if that were the case? Implicit in the question of the quality of the collateral the FED accepts for its loans, is the question of the solvency of the FED itself. Granted that there is no prospect for the financial failure of the FED, the question remains what would the economic failure of the FED look like. Would there come a point when no private sector bank would be interested in accepting FRNs? And what would the financial and economic world look like if that were the case?

]]> By: Independent Accountant http://www.nakedcapitalism.com/2008/02/fed-says-its-collateral-is-fine-thank.html#comment-4428 Independent Accountant Mon, 25 Feb 2008 09:23:00 +0000 http://www.nakedcapitalism.com/2008/02/the-fed-says-its-collateral-is-fine-thank-you-very-much/#comment-4428 In 1979 Barron's printed this joke: How do you know when the chairman of the Fed is lying? Answer: Every time he moves his lips. In 1979 Barron’s printed this joke: How do you know when the chairman of the Fed is lying? Answer: Every time he moves his lips.

]]> By: a http://www.nakedcapitalism.com/2008/02/fed-says-its-collateral-is-fine-thank.html#comment-4426 a Mon, 25 Feb 2008 08:42:00 +0000 http://www.nakedcapitalism.com/2008/02/the-fed-says-its-collateral-is-fine-thank-you-very-much/#comment-4426 The Fed accepts Agencies of course. But at 190 bips over Treasuries, what's the imlicit rating? The Fed accepts Agencies of course. But at 190 bips over Treasuries, what’s the imlicit rating?

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