Posts
4996
Joined
2/2/2008
Location
Sydney
AU
Edited Date/Time
1/10/2012 9:32am
Enter the era of DEFLATION. I've told you about this for over a year now...hope you guys are locked down over there.
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We couldn't find mention of the Fed buying "equities'' in its latest missive. If true, that's even more desperate. The news about lowering the bar on debt securities is worrying enough.
In an emergency measure to prop up Wall Street at the time of the Bear Stearns collapse in March the Fed had allowed banks to swap their high-rated securities for treasuries.
Today's announcement opens the gates right up. It also comes hard on the heels of the biggest nationalisation in US history - the bail-out of mortgage giants Fannie Mae and Freddie Mac just a few days ago.
The Fed has also increased the size (from $US175 billion to $US200 billion) and the frequency of its treasuries auctions.
The great unknown for Wall Street remains what will the knock-on effect of a liquidation of Lehman Brothers. Lehman has until midnight tonight to find a white knight or some manner of rescue package.
Once it goes into liquidation few will be able to predict the counterparty risks which would reverberate through financial markets. Few would have a handle on the likes of Lehman's credit default swap and other derivatives risks.
The consequences will be global. Via its acquisition of Grange Securities two years ago, Lehman inherited a local client list worth $2 billion. This client list, revealed in Business Day last month, spanned dozens of local council, semi-government, charity, church and super fund clients which had acquired CDOs (collateralised debt obligations) and other fancy debt instruments from Grange.
http://business.smh.com....n-20080915-4gse.html
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We couldn't find mention of the Fed buying "equities'' in its latest missive. If true, that's even more desperate. The news about lowering the bar on debt securities is worrying enough.
In an emergency measure to prop up Wall Street at the time of the Bear Stearns collapse in March the Fed had allowed banks to swap their high-rated securities for treasuries.
Today's announcement opens the gates right up. It also comes hard on the heels of the biggest nationalisation in US history - the bail-out of mortgage giants Fannie Mae and Freddie Mac just a few days ago.
The Fed has also increased the size (from $US175 billion to $US200 billion) and the frequency of its treasuries auctions.
The great unknown for Wall Street remains what will the knock-on effect of a liquidation of Lehman Brothers. Lehman has until midnight tonight to find a white knight or some manner of rescue package.
Once it goes into liquidation few will be able to predict the counterparty risks which would reverberate through financial markets. Few would have a handle on the likes of Lehman's credit default swap and other derivatives risks.
The consequences will be global. Via its acquisition of Grange Securities two years ago, Lehman inherited a local client list worth $2 billion. This client list, revealed in Business Day last month, spanned dozens of local council, semi-government, charity, church and super fund clients which had acquired CDOs (collateralised debt obligations) and other fancy debt instruments from Grange.
http://business.smh.com....n-20080915-4gse.html
The Shop
After leading the U.S. central bank from 1987 until two years ago, Alan Greenspan remains one of America's influential voices on economic matters.
Greenspan says America's current financial climate, in which the Federal government has felt compelled to seize control of two mortgage giants and engineer the takeover of a major investment firm, is unlike anything he has ever seen before.
Appearing on ABC's This Week program, Greenspan said the near-collapse of another well-known investment firm, Lehman Brothers, only adds to his consternation.
"This is a once in a half century, probably once in a century, type of event. There is no question that this is in the process of outstripping anything I have seen. And it still is not resolved and it still has a way to go," he said.
Greenspan tied the upheaval in financial firms to turmoil in America's housing market, saying the current picture will not improve until falling home prices stabilize in the United States.
Earlier this year, the Federal government provided an emergency loan to investment giant Bear Stearns, and helped engineer the selling of the firm to a rival corporation. Last week, the Bush administration took over two government-sponsored private mortgage firms, Fannie Mae and Freddie Mac, to rescue them from insolvency.
Greenspan said endless government rescues are not a good idea.
"We should not try to protect every single institution. The ordinary cost of financial change has winners and losers, to the extent that bailouts are draws on our scarce savings supply, you undermine the growth of the economy, and ultimately you get stagnation," said Greenspan.
But the former fed chief did say that some firms and institutions warrant assistance.
"There are certain types of institutions which are so fundamental to the functioning of the movement of savings into the real investment in an economy that on very rare occasions - and this is one of them - it is desirable to prevent them from liquidating in a sharply disruptive manner," continued Greenspan.
Despite a housing crisis, wild fluctuations in energy prices, and a jump in unemployment, the U.S. economy has continued to expand, albeit at a slow pace. Greenspan indicated he is pessimistic as to whether the United States and the larger world economy can avert a recession altogether, saying the chances are, in his words, "less than 50 percent."
"I cannot believe we could have a once in a century type of financial crisis without a significant impact on the real economy, globally," he said. "And I think that is, indeed, what is in the process of what is occurring."
Greenspan noted some economic positives: recent declines in oil prices and as well as in U.S inflation. He said he would be delighted if the United States managed to stave off a recession, but added he would not bet on such an outcome.
Hey, on the up side Oil is down to $95/bbl this morning.
One other upside is that on bad days Maria Bartaromos face puckers up like a big anus. And thats always good for a laugh.
Serioulsy though. How much longer can our politicians remain in denial of whats really going on? How much bullshit and blue skies do they think they can spout off and we'll continue to believe? Whats Paulson gonna say now? I know what hes thinking. He's thinking Im gonna be out of here in just a few months and it will be someone elses problem.
I normally have a bit of a the government should assist when it comes to helping out people in need but when shit like this happens I feel the government needs to put the screws to the institutions, hang the greedy bastards running the institutions and the legislators who helped the greedy bastards, and say "No Handouts" to those individuals who cannot control their spending and/or are too stupid to know better.
I hope there is a blood bath and some Wall Street cliff diving over the next few days.
I'll get off the soap box now.
The sad truth is that the folks raping everyone won't feel the pinch. It will be a mid level guy taking flight. And all us bottom feeders cleaning up the mess...
Post a reply to: Lehman flatlines..Fed in a panic..