Fed eyes extending emergency loans for Wall Street

[flashl]

Source: NY Times

WASHINGTON (AP) -- The Federal Reserve is considering giving squeezed Wall Street firms more time to draw emergency loans directly from the central bank to help them overcome credit problems, chairman Ben Bernanke said Tuesday.

In an extraordinary action, the Fed in March agreed to let investment houses go to the Fed -- on a temporary basis -- for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.

"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.

The Fed's decision to act -- temporarily at least -- as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.

NY Times

Read more: http://www.nytimes.com/aponline/washington/AP-Fed-Credit-Crisis.html

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Gotta love all of the financial alchemy that defies reason (e.g. daily emergency loans to Wall Street) which underpins the U.S. 'economy' and 'financial sector'.

[sshan2525]

1. We're fucked, people

I'm sorry but I know that this house of cards is about to fall and nothing the government does is going to stop it. This has been obvious to anyone who's paid any attention to the economy over the past few years. I wish no ill on the ignorant but I am going to take some small pleasure in watching those Repukes who have been blaming the media for not "reporting the good news" about this economy when they wake up one day and realize they're broke. SUV - gone. Vacation home - gone. Disposable income - gone. Hell, we'll all be lucky if we can afford toothpase when all is said and done. Go here and read this guy: http://jameshowardkunstler.typepad.com/ It's going to get ugly, folks.

[flashl]

4. From the link:

{T}he sickening spectacle of the nation's fatal insolvency, which remains partially disguised by the machinations of the Federal Reserve, using the various new loan "windows" to maintain the illusion that the major banks have not swindled themselves out of existence -- and in doing so, caused at least $3 trillion (so far) in capital to vanish in a black hole. This three-card-monte game has gone on for a whole year now, and the consequences are hitting home. No more money can be lent into existence now.

...

The lack of business is now leading to substantial layoffs. The airline industry is dying and will probably cease to exist in its familiar form in 24 months. The trucking industry is dying, threatening the entire just-in-time distribution system of things that even people with little money to spend still need, like food.

These conditions will now get a lot worse, no matter whether the banks continue to conceal their problems.

...

All this hardship and woe will be blamed on the Republican party. It may actually kill off the party. Political parties do go out-of-business in American history, and this one deserves to die -- with its aggressive no-nothingism, its avaricious, punitive religious extremism (the religious part often being fake), its stunning inattention to financial malfeasance in areas under its direct supervision, and its gross incompetent mismanagement of the nation's strategic interests.

[Voltaire99]

10. Don't let Kunstler scare you.

James is a delightful social critic and snazzy prose stylist but a terrible, terrible economist. In the years I've followed him, I've lost track of how many times he's predicted an imminent market crash or oil drought.

His problem is that he's blinded by schadenfreude. Dude really can't wait for it all to go to shit. But impotent rage is no model for analysis.

Yes, he's right about our need to abandon the "happy motoring" exurban living arrangement. But he's an amateur pissing in the wind when it comes to predicting collapse which he does with alarming regularity and certainty, later unashamedly professing disbelief that the idiotic culture hasn't hurried up and dissolved on schedule.

For heaven's sake, don't base a single assumption about anything that comes out of his lurid pen. It's no better than turning to L. Ron Hubbard for spiritual guidance. Read him for his other virtues -- the wit and the anger -- and take his doomsday stuff with a big grain of salt.

For less unhinged economics writing, try Nouriel Roubini, Michael Hudson or Calculated Risk instead. Each is a sharp critic of the present order, but with far more credibility than Kunstler.

[AdHocSolver]

14. This is the same evaluation of the "doom-sayers" in 1929.

What the Fed, which engineered the Great Theft of America under Greenspan, is doing now is shifting the deck chairs on the Titanic.

The Fed, under Greenspan, kept the interest rates artificially low to promote the stock market boom, a la Enron, and then promote the real estate boom and the substandard mortgage markets. The Republicans then gutted the Glass-Steagall Act which was designed essentially to keep speculators' hands off of the cash in banks that represented people's savings.

What the Fed is proposing now is more of the same that the government tried in 1929 to stave off the imminent collapse of the economy. That is where we are now. It will get worse. For the past few years, the corporate elite have been merging to stave off corporate collapse, or selling American corporations to foreign investors to be able to keep operating. They are running out of foreign buyers. This Ponzi scheme is about to collapse.

The meltdown could have been prevented, but is going to happen, as the Fed tries desperately to protect the assets of its wealthy clientele. The Fed's actions to protect the rich is going to collapse this house of cards.

The model of what is taking place is General Motors executives for years ignoring the energy "crisis" by producing gas guzzlers while the foreign auto companies are developing hybrid technology. Then when GM can't sell their gas guzzlers, they fire tens of thousands of employees to "save" the company from the GM executives' incompetent management.

[AdHocSolver]

15. Most economists are propagandists for the rich. Read Kevin Phillips to understand what is going on.

[Turbineguy]

2. Eindlossung

for the middle class.

Bentley dealers can sleep easier tonight.

[Tindalos]

3. Wish someone would bail me out of my bad decisions

But no, when I make mistakes, it's "a learning opportunity". Or as I like to call it, "my own damn fault".

Too bad we are all going to be hurt by the bad decisions of the so-called financial experts.

[htuttle]

7. Yeah, I wish I could get the government to cover my gambling tab!

I can't tell you how many times I've heard that the whole reason that 'capitalists' are justified in making so much money from simply moving money around is due to all the 'risks' that they take.

Unless they lose money -- then we all have to make up their losses...some "risk". :eyes:

[kirby]

8. No, its 'Personal Responsibility'...

That is the catchphrase the Repubs like to use.

[KansDem]

9. I'm with you...

I have made a poor decision or two with regard to my finances, but I am suffering the consequences of those poor decisions. My only recourse is to (1) find a second job in addition to my primary employment; (2) seek a career move to a better-paying job; (3) cut back to the bare essentials until I'm out of debt.

Probably a combination of all three: take a second job now while preparing for a career-change while cutting back to the bare essentials. I suggest the execs and CEOs do the same...

[fascisthunter]

5. so the wealthy pilfered just average Americans can bail them out

disgusting

[Javaman]

6. Yeah, "loans". more corporate welfare. and here I didn't even think I was clarvoyent...

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3576473&mesg_id=3576664

[PSPS]

11. They're not loans. They're "loans."

Crook lender gets to swap his worthless paper for an equivalent amount in Fed securities AT PARITY! After, I think, 90 days, the "loan" gets renewed ad infinitum. So, in other words, the taxpayers bail out the crooks to the tune of 100 cents on the dollar.

Why aren't these guys swinging from lamp posts?

[ozone_man]

12. Don't bail out these Wall Street shysters.

Put them in jail, and abolish the FED while we're at it. They're crooks taking care of other crooks.

[Zorra]

13. They won't be able to re-pay the loans, and the Fed will write the loans off.

The American Taxpayer will get stuck with the bill, plus the massive interest that will be eternally accrued.