Comments on: Link 6/20/08 http://www.nakedcapitalism.com/2008/06/link-62008.html Sun, 22 Nov 2009 21:35:21 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Richard Kline http://www.nakedcapitalism.com/2008/06/link-62008.html#comment-9813 Richard Kline Fri, 20 Jun 2008 11:01:00 +0000 http://www.nakedcapitalism.com/2008/06/link-62008/#comment-9813 Jim Grant in his article on the degradation of Bagehot's lender of last resort: "In Boston, before a Mortgage Bankers Association audience on May 6, the chairman of the Federal Housing Finance Board, Ronald Rosenfeld, noted that the Federal Home Loan Banks, which his agency supervises, are closing in on $1 trillion in outstanding loans, or "advances" ($925 billion currently are outstanding, up by $300 billion since last June). "The FHLBs," Reuters reported of Mr. Rosenfeld's remarks, "are facing increased risk due to the concentration of loans to big financial institutions that recently 'decided to become very involved in the FHLB system,' Mr. Rosenfeld said. Those banks include Countrywide, Washington Mutual Inc. and Wells Fargo & Co., he said. The top borrowers of the FHLB system account for 37% of all advances, he said. 'That's an astonishing number, and an astonishing amount of concentration,' he said."<br/><br/>Awful. Just absolutely awful concentration. If WaMu goes unquiet into that good night, it just might take the FHLB down with it with those kind of numbers. I realize that we are, yes Virginia, in a banking crisis, but the fundamental gutlessness of the leading minds at the Fed and the Treasury in refusing to do ANY relevant triage _while they still can_ will leave their names in this history books on the 'Loser' side of the ledger. Sheesh. Jim Grant in his article on the degradation of Bagehot’s lender of last resort: “In Boston, before a Mortgage Bankers Association audience on May 6, the chairman of the Federal Housing Finance Board, Ronald Rosenfeld, noted that the Federal Home Loan Banks, which his agency supervises, are closing in on $1 trillion in outstanding loans, or “advances” ($925 billion currently are outstanding, up by $300 billion since last June). “The FHLBs,” Reuters reported of Mr. Rosenfeld’s remarks, “are facing increased risk due to the concentration of loans to big financial institutions that recently ‘decided to become very involved in the FHLB system,’ Mr. Rosenfeld said. Those banks include Countrywide, Washington Mutual Inc. and Wells Fargo & Co., he said. The top borrowers of the FHLB system account for 37% of all advances, he said. ‘That’s an astonishing number, and an astonishing amount of concentration,’ he said.”

Awful. Just absolutely awful concentration. If WaMu goes unquiet into that good night, it just might take the FHLB down with it with those kind of numbers. I realize that we are, yes Virginia, in a banking crisis, but the fundamental gutlessness of the leading minds at the Fed and the Treasury in refusing to do ANY relevant triage _while they still can_ will leave their names in this history books on the ‘Loser’ side of the ledger. Sheesh.

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