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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (8571)	12/12/2007 8:02:12 PM
From: robert b furman	Read Replies (2) \| Respond to of 33421

"This" is a fed member bank not paying a penalty rate for a deficiency of reserves that are required to be part of the federal reserve system. A fed discount penalty elimination allows unlimited leveraging-which unduly imperils those conservative banks that are responsible for their mortgages and the respective defaults.Not to mention inflationary money creation universally. So this bidding for funds, that provides liquidity on collateralized debt obligations, that either are toxic or at least scare the hell out of banks that don't know what's in the sliced and diced debt to the point where they'd only lowball the value for fear of taking on a loser. If you are one of the highflyers that embraced these new debt instruments,and collected a lot of fees,and now are at the end of the day holding that which they peddled,and to a greater degree out in the future it will all come back to them at expiration or roll over time. So they've got a time bomb on their hand - sell at depressed values that assure no hurt to the buyer (in the buyers estimation) or put it up as collateral - pay an auctioned rate,and let the crap they peddled pay out. If you didn't fraudulently junk the paper - it'll work out.They should know they bought it ,packaged it and peddled it - with our reputations guarantee! If you bogued the paper - it'll come home and it will be devastating - as well it should be. IMO So they are crying for a bail out at all costs, not an auction process where they now the value of what they'll end up holding. The fed is primarily composed of conservative local bankers that know their customers - have PLENTY of money to loan and aren't worried. The outrage is coming from brokers,mortgage loan originators,and global money banks, that pumped this fee based product, to all corners of the world at a higher than treasurey market rate when deflationary forces affered no high yields and people took them for a higher yield. The BIG SNAFU is upon expiration it all comes back to roost to the packaging bank.The citi's,the UBS's,The Wachovia's the WaMU's. These are the boys in hurt and doing the screaming mostly wall street based players. The fed really isn't hip to opening the discount flood gates because the majority of the rank and file local banks do not need the funds, and don't want their fly by night big fee based banking buddies to lower the margins on the money they can get on deposits backed by reserves on good conservative legit loans. If you listen to the "outrage", it is the brokers and wall street global banks that are crying and manipulating (shorting the hyped volatility like GS has) the markets down in a tantrum. The fed will serve it rank and file members. This auction allows limited capital,on a global basis (at a bid for price) to be paid by those who have played the game and are in need. That's what going on here - it is not as wide spread as the wall street perspective would have you believe. JMHO Bob