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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (42767)	1/8/1999 8:25:00 PM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Wayne, from the november issue of the Richebacher Letter " For the month of October, total bank credit expanded at a stunning annual rate of 22 %. Importantly, almost half of this growth was in security purchases. Bank holdings of non-U.S. government securities surged $37 billion, or at an annual rate surpassing 100%. taking up the slack from the faltering securities markets, banks were also aggressive lenders as commercial and industrial loans soared at an annual rate of 27%. Interestingly, with bank credit exploding by almost $100 billion during October, bank deposits increased but 423 billion. The huge gap between bank credit and deposit growth was filled by " borrowings from banks and others" .... source: The Richebacher Letter 1217 St. Paul ST Baltimore MD 21202 Asset backed securites at $3.7 TRILLION are playing a major role in this credit bubble. Mike

To: Freedom Fighter who wrote (42767)	1/8/1999 8:40:00 PM
From: Knighty Tin	Respond to of 132070

Wayne, Several ways, one of which you mentioned. The call money market is obviously a large one and one of the few with huge spreads and perceived low risks for the money center banks. The banks can borrow from the Fed at low rates and then lend to the brokerage firms for listed equity backed loans at fairly high rates. Of course, the brokers usually tack on extra interest to individual buyers, so both institutions profit from the liquidity and money creation of this perma bull market. Much more importantly, the broker's money mgt. subs. are the repositories of the money market deposits that have grown exponentially during this bubble bull market. If someone has a 401K, they generally have several equity options, a few bond options, and a money fund or two. For whatever reason, banks do not pay competitive rates on money funds. That means that when AG lowers rates and inflates the money supply, the brokers are receiving an ever increasing share of the new deposits than do the banks. The banks and insurance cos. are the biggest buyers of securities and we know that lower rates and easy credit make them more likely to buy securities, which they do through the major brokerage firms. Among those securities are the borrow short, lend long paper generated by Fannie Mae and Freddie Mac. That has expanded exponentially and individuals own almost none of this paper. The stocks, yes, but not their debt. So, the brokers may do even better than the banks when credit floods the market. Of course, unlike the banks, they pay employees, so they don't show much in the way of profit growth. <G> MB