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To: pater tenebrarum who wrote (101449)	5/11/2001 8:49:00 AM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 436258

it's official. we got new t-bills. called F-bills UPDATE 1-Fannie to start debt sales aimed at individuals By Lynn Adler NEW YORK, May 10 (Reuters) - In the latest outreach to Main Street by major U.S. corporations, Fannie Mae <FNM.N>, the No. 1 U.S. home funding source, said on Thursday it will begin offering senior debt securities aimed at individual investors. The new program, from one of the nation's largest borrowers, comes as buyers reach for more yield and quality in fixed-income assets after a dramatic stock market shakeout. "Certainly for the investor it's a great opportunity to get another good credit-quality instrument easily available," said Gemma Wright, director of market strategy for the Americas at Barclays Capital. Fannie Mae benefits by deepening its investor pool, she added. "Equities have gotten the lion's share of attention over the last couple of years, but I think bonds are going to have new interest as people are going to look for yield in other investment vehicles," Wright added. Fannie Mae expects to sell "investment notes" in several issues on a weekly basis, with maturities of one to 30 years, starting Monday. The notes will have various interest rates, interest payment dates, maturities and redemption provisions. Rated triple-A by Moody's Investors Service and Standard & Poor's, the highest investment-grade credit quality, the notes will be offered at par in $1,000 increments. ALL ROADS LEAD TO DIVERSITY Fannie Mae has historically targeted its debt to large institutional investors. "We have felt for a while that it's important for us to look at the retail base -- a very, very large population -- and figure out a way to get our debt securities efficiently into their hands," Linda Knight, Fannie Mae's senior vice president and treasurer, told Reuters. New technology aiding widespread distribution, an aging U.S. population that may boost demand for high-grade fixed-income debt, stock market volatility and Fannie Mae's desire to grow itsretail investor base are the main drivers behind the company's decision to start the program now, she said. Demand may rise naturally among ordinary investors who have been whipsawed by stocks. When stocks were surging, there was a feeding frenzy, particularly in high-tech stocks, that unbalanced many investor portfolios. The value of those holdings often plunged when equities were hammered this year. "The last couple of years have really demonstrated how volatile the equity market can be, and that may be a reason for retail investors to consider a little more diversification in their portfolios," Knight said. BRAND NAME RECOGNITION Fannie Mae is in good company. It joins the list of widely known corporations that have opened their doors wider to individuals in recent months, offering tailor-made debt investments and an alternative to widely available U.S. Treasuries. Housing finance giant Freddie Mac <FRE.N> since late March has been selling "FreddieNotes"; Tennessee Valley Authority, the largest U.S. wholesale electricity producer, started selling "electronotes" in April; Household Finance Corp., a unit of consumer finance company Household International Inc. <HI.N>, and Bank of America Corp. <BAC.N>, the No. 1 U.S. bank, started selling "InterNotes" for ordinary investors in March and January, respectively. Other companies may jump on this bandwagon. But it will be the high-profile and highly regarded names that are most successful, strategists said. "You don't have to sell Fannie Mae -- most investors know about them," said Mario De Rose, fixed income strategist at Edward Jones & Co., St. Louis., which is one of the dealer firms in the selling group. Fannie Mae will issue "in a variety of maturities, you know they'll be in the market every week and they're a household name," he said. "These are the things individual investors like to see." The company has not determined the size of the "investment note" program. Most of the notes will have call features, which give Fannie Mae the option of redeeming the notes during a specified period before maturity. The notes will not be redeemable at the option of the note holders. Merrill Lynch is the lead manager. Notes purchased from Merrill by the dealer selling group members may be resold to individual investors or to other dealers. REUTERS Rtr 18:55 05-10-01

To: pater tenebrarum who wrote (101449)	5/11/2001 8:58:21 AM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 436258

where o where has the risk free rate gone? eventually to gold? =DJ Swaps As A Benchmark Poses Systemic Risk Issues: CSFB 10 May 08:16 (This article was originally published Wednesday) By Michael Mackenzie Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Federal Reserve Chairman Alan Greenspan might have adopted a sanguine tone when he spoke about the continued diminution of the Treasury market last month, but one investment bank has warned that the prospect of interest rate swaps replacing Treasurys as the fixed income benchmark could create a nightmare for central bankers. Acknowledging a future devoid of risk-free Treasury securities at a recent meeting of the Bond Market Association, Greenspan expressed his optimism that the financial market would be able to create alternative interest rate benchmarks. One alternative non-government measure that's garnered a strong presence within capital markets in recent years is that of interest rate swaps, derivative instruments that are structured around a contract in which one party agrees to make payments at a fixed rate of interest while the other agrees to pay a floating rate. But while they've rapidly become significant tools for valuing, pricing and hedging corporate bonds, mortgage-backed securities and agency securities, it's questionable whether they can adequately function as a true benchmark in times of financial crisis. "Private sector benchmarks are fine and good except in the (unlikely) case of a systemic crisis," Credit Suisse First Boston analysts wrote in a research note Monday. "Systemic risk remains a factor in the pricing of swaps." On three occasions during the past three years, the swap market has experienced distinct bouts of illiquidity. These include the near bankruptcy of the hedge fund Long Term Capital Management in the aftermath of Russia's debt default in October 1998, the Y2K panic of summer 1999 and the burst of monetary tightening by the Federal Reserve in April-May 2000. During these periods, the interbank swap market closed the shutters, with the consequence that trades beyond even the standard size of $50 million became difficult to execute. The rationale for this inactivity lay in the overwhelming desire of market participants to pay fixed on a swap contract. The strong one-directional flows meant swap dealers were unable to accommodate the demand to pay fixed because very few participants were willing to sit on the other side of the contract and make floating rate payments when credit risks, and therefore private credit interest rates, were rising. Not surprisingly, CSFB said, swap spreads vaulted sharply higher during these periods as dealers "raised their offer levels to sharply ration flows... you could run, but you couldn't hedge." One-Way Only The dysfunctional nature of the swaps market in times of trouble is compounded by the ongoing consolidation of the banking industry, which is reducing the number of swap counterparties. The recent merger of Chase Manhattan and JP Morgan has created a giant that dwarfs other banks within the interest rate swaps sphere, a market that the Bank of International Settlements estimated at $48 trillion in June last year. At the end of last year, JP Morgan Chase & Co. (JPM) had a notional outstanding amount of $13.5 trillion in interest rate swap contracts according to Swaps Monitor Publications Inc, an Internet-based provider of global derivatives data based in New York City. Trailing some distance behind in terms of outstanding notional interest rate swap contracts were Bank of America Corp. (BAC) with $3.8 trillion and Citigroup Inc. (C), which had a notional outstanding amount of $3.7 trillion. Although banks trading swaps between each other in the interbank market pledge collateral to reduce counterparty risk, "the problem is that private-name collateral is subject to the same systemic risk as the swap market itself," the CSFB analysts wrote. This raises the specter that during a financial crisis "all such collateral may became illiquid." Given the track record of the swaps market and the present diminution of the Treasurys market, CSFB argued that "the market appears to proceed under the assumption that central banks will remain the ultimate guarantor of the swaps market." The rationale, CSFB said, is that a "systemic crisis" that would cause the "interruption of current payments on interest-rate swaps would shut down the world's financial system and cause incalculable economic damage, unless central banks step in." CSFB argued that the financial markets are ahead of the curve in believing central banks would alleviate stress within the swaps market during a future crisis, because they are pricing swaps at a significant premium to the debt of the Double-A-rated banks that participate in the swaps market. "For years we have heard the old wives tale that swaps simply were a generic AA credit," CSFB wrote, noting that the credit of Double-A-rated banks actually trades much lower than that of swaps. For example, Citigroup's recent 5-year note issue, which received a Double-A rating from Fitch, was priced at 5.75%, or 100 basis points over comparable Treasurys on Friday, at the same time that the 5-year swap spread was trading at around 71 basis points over Treasurys. "Clearly, the risk to swap transactions is identical to the risk of the banking system," and this means "forcing the world to rely on private benchmarks puts all the more onus on central banks to step in," CSFB said. Hence a world depleted of Treasurys, which provide a source of low risk and highly liquid collateral, and the ensuing reliance upon private benchmarks such as swaps, pose significant dangers. A systemic shock could herald emergency surgery from central banks, because in such a world "the entire banking system has become too big to fail," CSFB said. -By Michael Mackenzie, Dow Jones Newswires, 201-938-5451; michael.mackenzie@dowjones.com (END) DOW JONES NEWS 05-10-01 08:16 AM

To: pater tenebrarum who wrote (101449)	5/11/2001 10:52:35 AM
From: Dr. Jeff	Read Replies (3) \| Respond to of 436258

I assume you read Bubbleboys speech: federalreserve.gov The man is downright frightening! <<<In conclusion, let me state the obvious. The purpose of banking, finance, and intermediation is to facilitate the production and trade of goods and services. Standards of living rise when the cash flows from obsolescent, low-productivity capital are employed to finance newer, cutting-edge, technologies--the process that Joseph Schumpeter many decades ago labeled "creative destruction." >>> Something about him uttering "creative destruction" made me realize what he has done with his profligate monetary policy would more aptly be called "DESTRUCTIVE CREATION" !!!!