Category Archives: Federal Reserve

Stephen Roach Needs to Read the Fed’s Website

Today the Financial Times has a comment penned by Morgan Stanley’s Asia chief Stephen Roach, “Add ‘financial stability’ to the Fed’s mandate.” A regulatory backlash is under way as the US body politic comes to grips with the financial crisis. Wall Street – or what is left of it – is first in the line […]

Fed Commercial Paper Program Raises Rather Than Lowers Borrowing Rates

We have written before how many of the various government interventions to try to produce specific outcomes in financial markets have either not proven very successful or produced adverse outcomes elsehwhere. The latest example is the Fed’s new program by which it is buying commercial paper, a form of short-term corporate debt, directly from companies […]

Morgan Stanley Spent $23 Billion to Shore Up Money Market Funds

Morgan Stanley’s money market funds were hit by major redemptions in September, and the firm stepped in to fund half of the withdrawals itself, presumably out of a view that selling the underlying fund assets into a deteriorating market would only lead to distressed prices. But one has to wonder whether the positions that Morgan […]

The Black Hole Grows: AIG Says it May Need Even More Money

In case you weren’t keeping tabs (the number and variety of handout-recipients grows with every passing day), AIG was first given a loan (really, akin to a maximum borrowing authorization) of $85 billion with much fanfare and high drama, which was later quietly increased by another $37.8 billion. In the last ten days, AIG has […]

Troubling Details in NYT Account of Official Response to Financial Crisis

The New York Times is publishing a series on the financial crisis, “The Reckoning,” and today’s installment is “Struggling to Keep Up as the Crisis Raced On.” While this is a useful recap, there are some tidbits that merit commentary, such as: “Ben said, ‘Will you go to Congress with me?’ ” said Mr. Paulson, […]

Fed Provides $540 Billion Prop to Money Funds After a Week of Record Inflows

The Fed is throwing a massive lifeline to money market funds AFTER the crisis has passed and investors are entering the pool again on their own. Consider today’s story from the Financial Times: The US Federal Reserve on Tuesday said it would finance up to $540bn (€410bn) in purchases of short-term debt from money market […]

AIG: The Never-Ending Bailout

AIG is becoming a recidivist petitioner for government largesse. First it was $85 billion, then another $38 billion, and now the giant insurer also wants access to the Fed’s commercial paper facility. From Bloomberg (hat tip reader Steve): American International Group, the insurer that agreed to a government takeover in exchange for a federal loan, […]

"Fed Leads Unprecedented Push by Central Banks to Flood Market With Dollars"

The reader/investor who sent the link to this Bloomberg story provided the comments below. Not he does not resort to capital letters casually: THIS IS HARD TO BELIEVE. THOSE CB’S DON’T HAVE UNLIMITED $’S, SO IF TRUE, THEY WILL BE BORROWING THEM FROM THE FED VIA AN EXTENSION OF FED SWAP LINES, THE FOMC HAS […]

"Are Central Banks Making Libor WORSE?"

Equity analyst and market commentator James Bianco of Arbor Research e-maileda a discussion of the breakdown of interbank lending to us along with a few others, His note illustrates a point made by FT Alphaville a couple of weeks ago that we have harped on since, namely, that central banks’ efforts to provide liquidity to […]

Three Month Dollar Libor Increases

Nearly two weeks ago, it was becomimg apparent that central bank liquidity operations were not merely ineffective, but had become counterproductive in getting banks to lend to each other. As FT Althaville noted: Liquidity is being thrown at the system, but it’s just making things worse. By pumping in more money central banks aren’t addressing […]

Fed Lending Another $38 Billion to AIG

There is a new press release up at the Fed on its latest loan to troubled insurer AIG (hat tip Dealbreaker): The Federal Reserve Board has authorized the Federal Reserve Bank of New York to borrow securities from certain regulated U.S. insurance subsidiaries of the American International Group (AIG), under section 13(3) of the Federal […]

Coordinated Central Bank Action Fails to Relieve Money Markets

The coordinated central ban effort today to restore some level of activity to stressed funding markets, in which five central banks cut their policy rates by a half a point and China cut rates by 0.27%, is a resounding failure. From Bloomberg: Overnight corporate borrowing costs jumped, Treasury bill yields fell and the bond market […]

Coordinated Central Bank Rate Cuts Stem Equity Rout

The Federal Reserve, ECB, Bank of England, Sweden’s Risbank, and Bank of Canada all made rate cuts, each of a half a percent; China cut its benchmark rate by 0.27%. The move pared substantial losses in foreign equity markets (the FTSE, which also benefited from a capital injection into stressed banks) is up slightly, and […]

NY Times: Fed Considering Buying Commercial Paper

Now we see how the Fed’s toolkit is not well suited to the problem at hand, and its next-best moves are dubious indeed. Acute conditions in the commercial paper market, a vital source of short-term funding for large corporations and banks, threaten to produce a sharp contraction in business activity. Commercial paper defaults have been […]