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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: pogohere who wrote (12596)	10/17/2008 7:29:41 PM
From: pogohere	1 Recommendation Respond to of 50350

Banks Admit Bailout Won't Work Posted Oct 17, 2008 09:48am EDT by Henry Blodget From ClusterStock.com, Oct. 17, 2008: So much for that story. A few days ago, when Hank Paulson called the heads of the nine families to Washington and shoved cash down their throats, he announced that the banks would use this new taxpayer cash to lend. They won't, of course. They'll hoard it like a starving family who has just been given a grocery cart full of food. And after a few days of silence, even the banks are finally admitting that. So it's back to the drawing board for Paulson & Co. Next steps? Find a way to force the banks to write their assets down to nuclear winter levels, so 1) private investors don't have to worry about getting sandbagged and therefore invest more in the banks, and 2) the banks know they won't be forced to take more multi-billion dollar losses. Only then will the banks begin to lend again. And at that point, the only challenge will be finding people and companies to lend to, in an economy headed straight into the tank.) John Thain, the chief executive of Merrill Lynch, said on Thursday that banks were unlikely to act swiftly. Executives at other banks privately expressed a similar view. “We will have the opportunity to redeploy that,” Mr. Thain said of the new capital on a telephone call with analysts. “But at least for the next quarter, it’s just going to be a cushion."... “I don’t think that the market wants to see that capital being put to work to leverage the business up again,” said Roger Freeman, an analyst at Barclays Capital, which acquired parts of the now-bankrupt Lehman Brothers last month. “My expectation is it’s quarters off, not months off, before you see that capital being put to work.”... Jamie Dimon, the chairman and chief executive of JPMorgan, said his bank was in a stronger position to use the money than some of its competitors. “It’s clear that the government would like us to use the capital,” Mr. Dimon said on a conference call with analysts on Wednesday. “If you are a bank that is filling a hole, you obviously can’t do that.” Who is "a bank that is filling a hole"? Seven of the nine that just got taxpayer money. finance.yahoo.com

To: pogohere who wrote (12596)	11/6/2008 11:25:51 PM
From: pogohere	Respond to of 50350

Fed capitulates: the central bank is broken Or perhaps better, the entire banking system is broken. The Federal Reserve Board on Wednesday announced that it will alter the formulas used to determine the interest rates paid to depository institutions on required reserve balances and excess reserve balances. Previously, the rate on required reserve balances had been set at the average target federal funds rate established by the Federal Open Market Committee (FOMC) over a reserves maintenance period minus 10 basis points. The rate on excess balances had been set as the lowest federal funds rate target in effect during a reserve maintenance period minus 35 basis points. Under the new formulas, the rate on required reserve balances will be set equal to the average target federal funds rate over the reserve maintenance period. The rate on excess balances will be set equal to the lowest FOMC target rate in effect during the reserve maintenance period. These changes will become effective for the maintenance periods beginning Thursday, November 6. The Board judged that these changes would help foster trading in the funds market at rates closer to the FOMC’s target federal funds rate. Why do such a thing? Michael Cloherty at Bank of America points out in a research note this morning that the move will cripple the Fed Funds market - that is, interbank lending: The Fed is going to pay target flat for excess reserves rather than target less 35bps. This is likely to sharply reduce flows in the funds market. There is a staggering amount of excess reserves in the banking system– a normal level of reserves held at the Fed is $7.5bn, where last Wed there was $420bn. With that many excess reserves, funds should trade soft. Now, rather than lend to another bank at a sub-target rate, we should just see banks leave the $ in their account at the Fed. Volumes in the Fed funds market are likely to drop dramatically. [emphasis added] ftalphaville.ft.com