Comments on: Fed Commercial Paper Program Raises Rather Than Lowers Borrowing Rates http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html Mon, 23 Nov 2009 11:57:17 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23472 Anonymous Tue, 28 Oct 2008 11:59:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23472 I think perhaps the point of the story is subtle. The government starts buying up 90 day commercial paper which helps financial institutions (GE capital and insurers) to lend out at lower rates. Meanwhile industry which tends to sell 30 day commercial paper is having difficulty finding buyers for its debt.<br/> The FED thinking is possibly that if it buys enough 90 day debt then financial institutions will start to buy the shorter term 30 day commercial paper and convert it into 90 day debt it can sell to the FED. Unfortunately it appears to be a bit of a black hole as far as the financial institution debt is concerned. Not only is the lending not being passed on it is distorting the debt markets in a way which could damage the rest of the economy. I think perhaps the point of the story is subtle. The government starts buying up 90 day commercial paper which helps financial institutions (GE capital and insurers) to lend out at lower rates. Meanwhile industry which tends to sell 30 day commercial paper is having difficulty finding buyers for its debt.
The FED thinking is possibly that if it buys enough 90 day debt then financial institutions will start to buy the shorter term 30 day commercial paper and convert it into 90 day debt it can sell to the FED. Unfortunately it appears to be a bit of a black hole as far as the financial institution debt is concerned. Not only is the lending not being passed on it is distorting the debt markets in a way which could damage the rest of the economy.

]]> By: fresnodan http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23447 fresnodan Tue, 28 Oct 2008 09:19:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23447 what I can't help but wonder is how "solid" GE really is - isn't it really just another company that makes most of its profits through finance? If 5 "investment" banks went belly up, isn't it entirely rational to presume there may be financial instruments that GE owns that could be devastating to its balance sheet? what I can’t help but wonder is how “solid” GE really is – isn’t it really just another company that makes most of its profits through finance? If 5 “investment” banks went belly up, isn’t it entirely rational to presume there may be financial instruments that GE owns that could be devastating to its balance sheet?

]]> By: Citizen Clyde http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23432 Citizen Clyde Tue, 28 Oct 2008 03:42:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23432 Hey buy-side analyst,<br/><br/>The only thing working is the macro short thesis, individual metrics are getting swamped by second order effects.<br/><br/>The buy-side has been pathetic for a decade, and you are calling out Mish? Hahahahahahahahahha, I am laughing all the way to the bank at your incompetence. Hey buy-side analyst,

The only thing working is the macro short thesis, individual metrics are getting swamped by second order effects.

The buy-side has been pathetic for a decade, and you are calling out Mish? Hahahahahahahahahha, I am laughing all the way to the bank at your incompetence.

]]> By: Jed http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23429 Jed Tue, 28 Oct 2008 02:34:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23429 Pimco's Gross assured viewers this AM (Oct 27) that 3 month Libor would fall to 2.88 or less by Tuesday, October 28. <br/><br/>Pimco has been a huge beneficiary on both sides of this crisis e.g. the Fannie Freddie bailout and now running the CPFF.<br/><br/><a HREF="http://www.cnbc.com/id/15840232?video=906626482&play=1" REL="nofollow">Gross on Libor falling due to CPFF</a> Pimco’s Gross assured viewers this AM (Oct 27) that 3 month Libor would fall to 2.88 or less by Tuesday, October 28.

Pimco has been a huge beneficiary on both sides of this crisis e.g. the Fannie Freddie bailout and now running the CPFF.

Gross on Libor falling due to CPFF

]]> By: Anonymous http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23430 Anonymous Tue, 28 Oct 2008 02:34:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23430 Please. I sometimes find Mish insightful in spite of himself. But really, the only reason to click over to his site is for entertainment value. He actually writes quite well and has a pretty consistent point of view. In depth analysis? Well... Please. I sometimes find Mish insightful in spite of himself. But really, the only reason to click over to his site is for entertainment value. He actually writes quite well and has a pretty consistent point of view. In depth analysis? Well…

]]> By: tompain http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23417 tompain Mon, 27 Oct 2008 19:42:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23417 I second Yawner's comments about Mish's knowledge of specific companies. He often does not know what he is talking about. I second Yawner’s comments about Mish’s knowledge of specific companies. He often does not know what he is talking about.

]]> By: Yawner http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23416 Yawner Mon, 27 Oct 2008 19:11:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23416 viv- I actually just read Shedlock's post. While I like his stuff, since I follow GE closely as a buy-side analyst, it's clear he has spent maybe 30 seconds looking at their financials and has not spent any time with their SEC filings, or in familiarizing himself with their recent moves. Mish should stick to the bigger-picture macro stuff because posts like that, on an individual company where he clearly doesn't know the details, don't help his credibility. viv- I actually just read Shedlock’s post. While I like his stuff, since I follow GE closely as a buy-side analyst, it’s clear he has spent maybe 30 seconds looking at their financials and has not spent any time with their SEC filings, or in familiarizing himself with their recent moves. Mish should stick to the bigger-picture macro stuff because posts like that, on an individual company where he clearly doesn’t know the details, don’t help his credibility.

]]> By: Yawner http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23415 Yawner Mon, 27 Oct 2008 19:07:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23415 wintermute,<br/><br/>I think this an issue where Shedlock does not have it right- GE has been rolling paper for the past month and rates had come started to come back in even before the CP program was announced. It's a good conspiracy theory but not much more.<br/><br/>viv- a lot of that debt is equipment that GE Industrial has sold to good buyers. You can't get a conclusion just by looking at a couple of numbers. wintermute,

I think this an issue where Shedlock does not have it right- GE has been rolling paper for the past month and rates had come started to come back in even before the CP program was announced. It’s a good conspiracy theory but not much more.

viv- a lot of that debt is equipment that GE Industrial has sold to good buyers. You can’t get a conclusion just by looking at a couple of numbers.

]]> By: Viv http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23414 Viv Mon, 27 Oct 2008 19:02:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23414 Just taking a look at GE's balance sheet, it has 548 Billion dollars in both short and long term debt combined!! <br/><br/>GE needs the FED waaaay more than the FED needs GE's "support" Just taking a look at GE’s balance sheet, it has 548 Billion dollars in both short and long term debt combined!!

GE needs the FED waaaay more than the FED needs GE’s “support”

]]> By: wintermute http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises.html#comment-23412 wintermute Mon, 27 Oct 2008 18:28:00 +0000 http://www.nakedcapitalism.com/2008/10/fed-commercial-paper-program-raises-rather-than-lowers-borrowing-rates/#comment-23412 Mike Shedlock has also pointed out that the Bloomberg reporter completely missed the subtext of the GE recourse to Fed CP facility. <br/>GE is clearly having cashflow/rollover problems. <br/>I guess that their media (spindoctors) put out the press release in a way that made it look as positive as possible and BB swallowed it whole. Thank goodness we have people like Mike and Yves to call out failure and propandanda when they see it being sold to the public as a "solution" Mike Shedlock has also pointed out that the Bloomberg reporter completely missed the subtext of the GE recourse to Fed CP facility.
GE is clearly having cashflow/rollover problems.
I guess that their media (spindoctors) put out the press release in a way that made it look as positive as possible and BB swallowed it whole. Thank goodness we have people like Mike and Yves to call out failure and propandanda when they see it being sold to the public as a “solution”

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