December 12, 2007

When you're a bank about to fail, who do you call? The Lender of Last Resort of course

Lender of Last Resort:

An institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse.

In the U.S. the Federal Reserve acts as the lender of last resort to institutions that do not have any other means of borrowing and whose failure to obtain credit would dramatically affect the economy.


The Doors said...

This is the end
Beautiful friend
This is the end
My only friend, the end...

Edgar said...

Rule #1: The bankers win.

Rule #2: If the bankers don't win, see rule #1.

Anonymous said...

S&P Equity Research downgrades Washington Mutual (NYSE: WM) from Sell to Strong Sell.

Anonymous said...

Banker = Bankster

All the lawyers were kicked out of Hell to make room for bankers.

Actually, Hell is too good for the creeps.

Anonymous said...

Wells Fargo is holding $84B in worthless piggyback and second lien loans. These are worth 10 cents on the dollar based on the latest trades for these types of notes. Aren't they officially insolvent? Where is the FDIC?

The latter is probably where the ’second mortgage implosion’ will end up going. Why sell the loan for 10 cents on the dollar when you can get 25 to 50 cents from the borrower and lower their total outstanding liens on the property at the same time, getting them ‘right’ in the home again? Wells Fargo recently said they owned $84 billion of this worthless paper. That is a lot of seconds at an average of $100,000 a piece. Already, many lenders are locking up the second lines of credit and not allowing borrowers to pull the remaining open available credit to stop the bleeding. Second mortgages are defaulting at an amazing pace and it is picking up every month.

Veronica Lodge said...

RE: WASHINGTON (AP) -- The Federal Reserve announced Wednesday it was coordinating with other central banks to deal with the global credit crunch. Wall Street rallied after the surprise announcement.

Well, of course Wall Street rallied. That's the whole idea.

Top CEOs don't get their multi-million dollar compensation packages if their stock tanks before the end of the year.

The aim of the Federal Reserve is to hold things together until early 2008.

So far, so good...


Anonymous said...

"There is no means of avoiding the final collapse of a boom brought about by credit expansion.
-Ludwig von Mises

pwnd said...

A new poll conducted by the National Taxpayers Union shows that Americans have varying opinions on proposed plans to bail out subprime borrowers. Survey respondents weighed in on whether or not government intervention is necessary and who would benefit most from a taxpayer-funded bailout.

The poll was commissioned by the National Taxpayers Union and fielded by Harris Interactive.
2058 U.S. adults participated in the poll between November 27 and November 28; respondents were aged 18 years and older.
Data was weighed to reflect the composition of the U.S. population.

The majority of those surveyed were opposed to a taxpayer-funded bailout of the subprime mortgage market, but there were a surprising number of respondents who either support it or have no opinion.

There was also some disagreement as to who would benefit from a government-funded bailout of the subprime mortgage market. Nearly half of all respondents think a bailout would be most beneficial to lenders or Wall Street banks that profit from subprime mortgages.

Twenty-six percent believe that homeowners with subprime mortgages would benefit the most and ten percent didn't know. Three percent of respondents clearly didn't understand the question and said that taxpayers would get the most out of the deal.

The most interesting results came from a question about legislation that would allow the FHA and other government-sponsored entities to increase the size of loans they could buy and insure.

The majority of respondents--66 percent--said these proposals are 'nothing more than a taxpayer-funded bailout of mortgage lenders and banks that provided and profited from these risky loans.' The remaining 34 percent called taxpayer backed refinancing programs 'necessary' in order to prevent foreclosures and falling home prices.

...most people aren't nearly as worried as they should be about proposed government plans. A bailout of the subprime mortgage market would be expensive to taxpayers, not to mention grossly unfair.

There is no way to bail out subprime borrowers without bailing out the banks that made the loans. More to the point, neither party deserves a bailout. Both were driven by greed and both entered into the mortgage and home market at their own risk.

The argument that the majority of borrowers were somehow 'duped' into bad subprime loans is preposterous. While predatory lending is always present somewhere in the market, it takes two parties to make a deal.

If subprime borrowers would have been honest with themselves about what they could afford and if they had taken the time to read paperwork, crunch numbers and do all of the other things that come along with buying a house, they wouldn't be in this mess.

As for taxpayer-backed refinance programs--they are nothing more than a bailout. These programs transfer risk directly and purposely to the taxpayer. Expanding these programs is one of the greatest mistakes that could be made in this situation.

Home prices have been artificially inflated for years. Once a bubble forms, it is inevitable that it will eventually pop. Refinance programs will not stop this. It is despicable that our policymakers have the audacity even to insinuate that a solution like this is good for the nation.

skidmark said...

HPers please help Lisa, she has been swimming with the loan sharks.

She needs advice.

Uncle Harry Lime said...

Just as the comedian’s pre-contextualised 'current event' jokes are somehow less funny. Most publications crop of ‘how’d it happen???’ pieces on the mortgage mess are cold comfort to all US homeowners. Flooding our country with liquidity has produced, as expected, the elementary school understanding of economics boom then bust cycle. What can be done? Who can be saved? At what cost?

We now have entered that all too American armchair amusement: ‘assignation of blame’. Illegal Immigrants? After all didn’t they build the houses and do such nice landscaping? Loan Officers, Real Estate Brokers, Appraisers on the make? ‘Moral Hazard’ how delightfully devoid of reality, clarity and most of all, that pesky issue; context.

In many respects we’ve all lost our way. I see huge empty houses full of faux period furniture facing backwards away for their community into the void. Mammoth vehicles with lone drivers coming home ‘overtime late’. 50-inch flat screens to watch reruns of an America that seems to have been preempted. Going broke on would be a welcome trade for today’s lost bets. That dotcom loss was only one payment per not 360. Self-reliance? Now the victim will be able to blame him or herself — some sort of old fashioned cowboy justice. I fear President Reagan would approve. Does anyone recall the Savings and Loan mess?

Our consumer supported economic system is what it is, no more. We emulate our betters or at least those who are better at it. Wall Street’s Gordon Gekko (Ivan Boesky) three words still ring true “Greed is Good”. Is it? Was it? Well for some people maybe. I’m wondering how many official pardons, foreign service appointments, plea bargain deals and other hypocrisy will be forthcoming. I guessing it will be proportionate to, well, nothing.

During the Great Depression FDR did a good job preserving the American economic system. It will be tough to do it again with even more borrowed money. Today this fact seems to have been missed by the people running the show. Now we face very similar challenges caused by all too similar missteps. Oddly, the issue is where to turn? Maybe building up American manufacturing, technology, infrastructure and education might be a start. Or maybe we should let it fall – just keep a mirror handy, I guessing you’ll be asked to take a look by the incoming administration.

Keep up the good work!

Mr. Paulson said...

Santa's elves are busy scrubbing level three assets to get them as clean and shiny as they can. While all you punters are drinking eggnog and unwrapping presents, the Bank of Santa will be having a garage sale at the North Pole. Head elf "Buttons" Bernanke will be showing the wares to folks from China, Japan, Russia and anyone else with cash. They will be buying your mortgages, your shopping malls, skycscrapers, companies, and oh yeah, your Congressmen and Senators.

Meeerrrry Christmas!

abb said...

Remember that banks don't lend anything. Borrowers borrow the money into existence. The money doesn't exist until someone asks for it to be created.

So what are the banks/Fed really risking? Nothing. Except devaluing the dollar.

Anonymous said...

"This is very significant. It's a recognition of the turmoil in the financial system," said Mark Zandi, chief economist with Moody's, a research firm.

"This should help assuage concerns that the Federal Reserve is a step behind events, and markets should take solace in this," Zandi said. "The Federal Reserve is trying to provide more cash to the banking system."

Anonymous said...

Now the banks got a little loan and then what? Consumers, who are responsible for 3/4 of the GDP, are not buying homes, are going bankrupt, have no savings, no credit, overleveraged to the wazoo already, unemployment and inflation are becoming out of control, fixed income folks are screwed, etc, etc, etc.

May I ask how the banks are planning to make money without consumers, without car financing, without mortgages, without CDOs, without savings, without SIVs? Good luck, bankers.

Oh, one more thing, the republican bankers on Wall Street love socialism when it's for them to get a bailout. Hey GOP crooks, you're fooling anyone with your socialism rhetoric. Another proof that GOP loves socialism. It's the socialism of finance, in which the republicans get bailouts with taxpayer money.

May I ask Bernanke where he got those billions of dollars to bailout republican bankers when this country is insolvent and needs to borrow $1 billion per day from the Japanese and Chinese just to get by?

You republicans and GOP crooks alike are a disgrace to this country.

Anonymous said...

It's time to grab your pitchforks and torches and march on to the Fed people!!

westwest888 said...

Someone put up a video for the next youtube debate asking who they would appoint Federal Reserve Chairman, and what policy they'd like to see adopted.

consultant said...

Our US financial institutions have become corrupt and criminal minded. Understand the implications of this. All this virtually free money of the past 7 years has altered how the folks in this field look at "making" money. It's also radically changed how they look at solving this epic disaster. The fox is guarding the hen house.

Outright criminals and scam artists were allowed to enter the system in droves, usually as mortgage companies and real estate agents. But traditional banks and Wall St. firms jumped into the cesspool as well-up to their necks. Government looked the other way.

Now the million dollar question is, "Once you've made way too much easy money, can many of these same people go back to the staid, button down ways of the not too recent past?"
Human behavior and history tells us that once you go to the dark side, it's hard to come back and be a law abiding citizen.

Remember, almost NONE of the millions involved in this financial fiasco have been arrested, prosecuted and sent to prison. That means, criminals after easy money are still running the place.

Folks, beyond all the technical reasons why we will zig and zag from this to that for the next few months, the bottom line is we are in for a hard, sustained crash.

You cannot let criminals take over major institutions without very bad things happening.

There were people shouting to anyone who would listen that we shouldn't be doing this. Our leaders, business and political, sat by and allowed this to happen or enabled the looting.

Good people who didn't eat at the buffet are going to suffer. But it is a sign of our times that common sense is no longer a valued commodity in our culture.

It's scary to say and see how woefully unprepared we are for the future.

Merry Christmas everyone.

westwest888 said...

Replace scene in Fight Club with march on National Mall:

"His name was Hank Paulson. His name was Hank Paulson."

brokersleaveyoubroke said...

Wow, dow up 250 this morning and now it dropped 350 points to - 100. I haven't seen moves like that since spring of 2000.

I love the new program the fed just announced. Very few companies like to borrow from the fed discount window because when you go to the lender of last resort it's an admission that you're in deep trouble. The fed has a new fix for that. Now they'll lend you money but they don't tell anybody. This allows you to keep your stockholders in the dark until you have time to dump all your shares. The fed knows how to take care of their friends.

mhrist said...

Have you ever tried to find out how much is the reserve of the federal reserve? Well, I did sometime ago and if memory service me right it was right about 250 billion. I remember woundering since the European Central bank was at over 600 billion.
In any even with over 50 billion of write-downs already, and a money multiplier of about 10 we are technically down half a trillion already. And I think 50 billion of losses number is before bad news during the past week.
To say it bluntly, the banks are going bonkers. And some are happy.
It is like looking at the fans of a particular team, not happy this season because of a player choice or whatnot, going to a game and enjoying when their team fails.
Let me tell you a mindbender: if those banks and those people didn't do this bubble, there wouldn't of been so much money spent on the net, google & such would not have made so much money without actually selling anything, things like would have not been started and bought and there would have not been :)

The internet is a huge luxury and you know what happens to luxuries during a depression? They are the first to go. And the worst part is, that it is not like caviar, for which there will always be a king to buy it. The internet needs numbers, it will cost roughly the same to have a million people on, as to have a billion. More people off the net increases the prices for the ones on. With prices rising even more will stop using it, which again raises the price. In the end it will be too expensive for the last ones on even if they are obscenely rich.
Kind a like those condominium buildings that are having companies maintain the building for a certain amount. See, it costs them X to maintain the building.
X / Number Of Paying Tenants = Monthly Cost

As the number of paying tenants decreases, due to foreclosure or lack of moolah, the monthly payments of the individual tenants increases. And many of them will actually stop paying because their condos will still be maintained as long as there is someone paying. Down the spiral we go...

There are many examples, for instance in Eastern Europe the buildings had centralized water heating for each building. With communism you didn't really pay for that so it was great, just as we are not really paying for the internet, but many companies that are making money out of it are.
One day the people had to pay for the water heating. The people living in the buildings divided the cost amongst them self, and everything was great for a bit. But then the heating cost started raising for inflation was rampart and the price of oil/coal was rising because of shortages. Some the people using water heating could not afford the new prices and started turning a room here and there off.
This in effect started bumping the costs for everyone until even if you turn a room off you still pay more than before. So many started buying gas and electricity heathers which were cheaper already and turning the whole water heating off. And bam, in some time nobody is using the water heating.

And don't get me started on hyper inflations and crap like that. It is not pretty. And knowing a great majority of the people in America are convinced that today is how it always was, and it will always be. I just can't imagine those lonely, young, gullable, non-educated(devry does not educate, they teach skills), drugged out, superficial, instant gratification, anti-nature, bunch of pussies. They can't keep a girl around for a day, let alone organize something. They have no friends, or they think the guy they see once a month is their best friend. Their children hate them or they hate their folks. All are divorced, and if they are not it is more of a contract of convenience than marriage. They actually call marriage, a contract between a man and a woman :)
Anyway, my point is, I just don't see those people making it. Especially, the alone part is very crappy in a depression when the community needs to pull resources together and organize to provide some basic needs. You won't be able to just pick up the phone and have 20 cops and 20 doctors and firefighters on your doorstep in a minute. You will need your family, neighbors and friends. And here, we lost those long ago. And this is the way in CA, NV, AZ, and FL so don't give me the welfare cases in Ohio, they don't count.


Anonymous said...

The U.S. has approxiametly $9 trillion in government debt and the U.S. has approximately $13 trillion in mortgage debt.

All these fed actions are simply to keep the Bank and IB stocks from falling so far that they have to sell assets to shore up their balance sheets.

The stock market is in full blown panic as indicative of the wild trading.

Only one way for the stock market to go and that is down once all the rabbits are pulled out of the hat and none can do any tricks.

Don't buy into the hoped for Santa rally. Noone wants to be holding stocks when investors finally accept that there aren't any more rabbits.

Anonymous said...

>> Someone put up a video for the next youtube debate asking who they would appoint Federal Reserve Chairman, and what policy they'd like to see adopted.

Better yet: Dear Presidential Candidate, in your first day in office, how many, and which, of the Executive Orders President George W. Bush enacted during his term will you rescind?

Andrew from Russia said...

"One Final Loan! Please, I beg you!"

Things were definitely changing for the better when I stopped receiving all these "refi" spam e-mails! Given the recent events, is there any chance we might live to see the day when money again becomes the "store of value"?

Anonymous said...

FOR HELP CALL (use "corrected" HOPE tel. number...)

El Senior Presidente Jorge Bushco.

He is a genius, he will help you. He could then pretend to be Santa Claus or the tooth fairy instead of the LAME duck pretend president he is.


Sick and Dying America

michael said...

i am really beginning with the timing of all these Fed announcements.

they seem so fracking calculated.

mhrist said...

Uncle Harry Lime,
you will be ok. Very few are left that will be able to deal with the new world.
Read my previous post.


Anonymous said...

Hey Keith, when you say "The Lender Of Last Resort" you mean the honest taxpayer, right?

GOP loves socialism.

Anonymous said...

I think the Fed is going to monetise the collateral, which will be CDO's, SIV's and other toxic sludge the banks will mark to model, shunt through the M-LEC, and get 100¢ on the dollar for.

The Fed will be left holding the bag and will simply print its way out of it.

The banks win, the lenders win, the stock price goes up, the bulls win and the 'homeowners' get to live in their home because the assignations weren't filed.

The only problem is that a soda pop will cost $5.99.

Anonymous said...

The internet is a huge luxury and you know what happens to luxuries during a depression? They are the first to go. And the worst part is, that it is not like caviar, for which there will always be a king to buy it. The internet needs numbers, it will cost roughly the same to have a million people on, as to have a billion. More people off the net increases the prices for the ones on.

That scenario is unlikely since Google & Co will come to the rescue. Google is already laying thousands of miles of fiber optic cables on the ocean floor across the planet. And they will win the bid for the band auction coming up. Pretty soon internet will become free. We're lucky to have some of the most intelligent kids fighting the evil Baby Boomer crooks.

Anonymous said...

This just in (and without Vaseline, just like Larry Craig likes it):

A group of toy safety advocates has released its annual list of 10 toys it says are most hazardous to children. Do you know which toy has topped the list?

1. Barbie's Malibu Crack House

Anonymous said...

Oh man, that last hour rally to make the market barely positive is soooooo PPT. Just look at the graphs.

PPT crooks abound.

Anonymous said...

So what happens if the "lender of last resort" can't lend money?

borkafatty said...

And one wonders why they made the crack cocaine sentence a lesser charge....the Fed is smoking it all.

Anonymous said...

Who ya gonna call?


Anonymous said...

The DummyCrap sheep myth of Republican bankers on Wall Street:

Top Contributors
1 Citigroup Inc $637,110
2 Goldman Sachs $629,490
3 Morgan Stanley $476,510
4 DLA Piper $445,220
5 Time Warner $348,840
6 JP Morgan Chase & Co $347,675
7 Skadden, Arps et al $314,140
8 Kirkland & Ellis $291,850
9 Cablevision Systems $276,763
10 EMILY's List $267,127
11 Credit Suisse Group $262,900
12 National Amusements Inc $261,510
13 Corning Inc $255,850
14 Ernst & Young $239,350
15 Patton Boggs $220,038

Top Contributors
1 Goldman Sachs $458,440
2 Citigroup Inc $399,716
3 JP Morgan Chase & Co $325,200
4 Morgan Stanley $298,946
5 Bear Stearns $230,350
6 Merrill Lynch $226,150
7 UBS AG $214,250
8 Credit Suisse Group $199,044
9 Lehman Brothers $181,450
10 Time Warner $167,500
11 Ernst & Young $155,500
12 Paul, Weiss et al $150,300
13 Metropolitan Life $147,999
14 Neuberger & Berman $145,500
15 Deloitte Touche Tohmatsu $135,199
16 Newmark & Co Real Estate $128,950
17 Schulte, Roth & Zabel $118,000
18 American International Group $116,375
19 Lazard Freres & Co $115,750
20 Sullivan & Cromwell $113,500

Top Contributors
1 Citigroup Inc $415,600
2 United Technologies $386,650
3 Bear Stearns $354,450
4 SAC Capital Advisors $342,600
5 Goldman Sachs $264,916
6 American International Group $258,938
7 Deloitte & Touche $258,670
8 Greenwich Capital Markets $240,500
9 St Paul Travelers Companies $210,900
10 Morgan Stanley $208,425
11 JP Morgan Chase & Co $203,773
12 Credit Suisse Group $196,550
13 Merrill Lynch $192,350
14 Royal Bank of Scotland $184,050
15 PricewaterhouseCoopers $175,650
16 KPMG LLP $159,590
17 Ernst & Young $145,750
18 Lehman Brothers $140,100
19 General Electric $135,530
20 Hartford Financial Services $132,650

Don't bother the donkey party with the facts. They are too busy spreading lies.

Anonymous said...

The DummyCrap sheep myth of Republican bankers on Wall Street:

Hey Republican Fascist™ troll, Wall Street is mostly GOP but donate more to whoever has more chances of winning. Classic republican snake behavior.

Since the democrats are going to win everything, due to years of GOP screw ups and sex scandals and corruption cases, the republican bankers are shifting their money to the winners.

Nobody is forcing republican bankers to donate anything to democrats. Nobody is twisting their arms. Nevertheless, they are still republicans.

CNBC and Faux shows all those Kudlow & Cramer friends from Wall Street everyday. Cramer even has hissy fits on the air to pressure the Fed to bail his republican Wall Street friends. "You know nothing!" Remember?

If Giuliani and other republican candidates take the lead in the future, the republican bankers will shift their money again. GOP snake behavior, that's all. Just look how vicious they're to Ron Paul. Not even democrats are so evil to Ron Paul.

Anonymous said...


mhrist said...

Pretty soon internet will become free. We're lucky to have some of the most intelligent kids fighting the evil Baby Boomer crooks.
Sure, sure!


Anonymous said...

It's funny how the bushlovin limbaugh spouting dittoheads can give you all the facts and details about every single Democrat that ever was, yet you bring one of the Bush administration airheads up before congress to be asked a few questions about their job, and they're all;

I don't recall..duh.., I don't remember..duh.., I don't recollect..duh...

FlyingMonkeyWarrior said...

I don't recall..duh.., I don't remember..duh.., I don't recollect..duh...
Hillary could not remember anything during her "Whitewater Gate" interrogation by the investigative government comities about her employer The Rose Law Firm.

Anonymous said...

The truth hurts the DummyCrap sheep. No comment on the tens of millions going from Wall St and trial lawyers to the DemoCrappy Nazi CommiCzars? No, your shit does not smell so good after all.

Anonymous said...

Hillary is your next president. Enjoy. mua-ha-ha-ha-ha.

Gee Keith, thanks for censoring my extensive list of republican donors and their crimes. Nice democracy you're running here.