I'm probably mixing up apples and oranges here -
but somewhere in that mix of rollovers might be
words to the effect that the "texture" of the
rollovers may have changed ....
I am stating that based on this ....
SEVERE EDIT
The ABCP market is struggling mightily at the moment. Almost no one will provide financing to an asset-backed entity, especially not an asset-backed entity like a "structured investment vehicle" (SIV) that is full of mortgage-backed securities (MBS).
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Since almost all the investors who comprise the free market refuse to purchase ABCP, the Federal Reserve has stepped into the breach. In other words, the Fed is now financing the very same stuff that the world's private investors refuse to finance. What more do you need to know about the gravity of America's credit crisis?
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Repurchase Agreements, "repos" are also called Sale and Repurchase Agreements. Under these agreements, the seller (usually a bank) sells securities to a buyer (usually the Federal Reserve) for cash. But the seller (bank) agrees to re-purchase the securities from the buyer (Fed) at a later date. Typically the banks use Treasury bonds or Agency bonds as repo collateral. Lately, however, mortgage-backed securities (MBS) have become the collateral of choice.
In the early part of this year, the Fed rarely "repoed" an MBS. Weeks would pass between MBS repos. But as springtime arrived, MBS repos started popping up like so many daffodils. Just a few at first, then a few more, then eventually enough to absorb a money center bank's entire short-term liabilities...for example.
As the nearby chart clearly shows, the rolling 2-week total of "temporary" MBS repos soared from about zero in June to a whole bunch in August...and the repos are on the rise again, despite the "recovering" credit markets.
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So - just to dumb it down to my level ....
how much of that 40 or so billion roll-over did the fed allow
to be backed by these MBS thingie things.
MBS - Monetorized-Barren-Slugs
howestreet.com
regards,
John |
