Is anyone following the Fed program called "Standby Financing Facility"? This program allows the major broker/ dealers to use any form of gov't paper (including strips and mortgage backed paper) as collateral for loans to ensure liquidity around Y2K.
ny.frb.org
And today the list was expanded to include the kitchen sink:
<<Fed expands list of acceptable collateral NEW YORK, Oct 22 (Reuters) - Federal Reserve Banks have expanded the range of collateral acceptable for discount window and payments system risk purposes, the Federal Reserve Bank of New York said.
A Federal Reserve Bank of New York spokesman said on Friday that the changes were related to discount window borrowing and were ``largely symbolic.'
The changes were not ``specific to Y2K,' he added. ``We have always had the discretion to re-evaluate collateral and to make changes in what types of collateral would be accepted.'
In a circular posted on the New York Fed's website, the Federal Reserve Bank of New York said certificates of deposit (rated investment grade), deposit notes (rated investment grade), commercial paper and other debt instruments by banks or affiliates of banks (rated investment grade), collateralized bond obligations (rated AAA), collateralized loan obligations (rated AAA), and commercial mortgage backed securities (rated AAA) were the additional types of assets now acceptable for discount window and payments system risk purposes.>>
biz.yahoo.com
But the Fed's own web site contradicts this assertion that this change is being made in connection with Y2K:
<<The acceptance of a broader range of collateral will improve the FRBNY?s ability to address expanded reserve needs that are now anticipated for the fourth quarter.>>
While this will no doubt let banks have needed liquidity, won't it also let the securities dealers have extra cash on hand to play hanky panky? Also, if Y2K is a non-event like Al told us, why does this facility need to be in place at all, much less for 3 weeks until the middle of January? Also, these time periods coincide with blackout periods currently being dictated by mortgage conduits and other real estate entities with Wall Street connection for commercial closings.
Sorry for the long post. |
