Skip to comments.Fed VIP: Treasury had "nearly a failed Treasury bill auction"
Posted on 10/18/2007 5:43:18 PM PDT by NaturalGorilla
In a remarkable speech, yesterday, at the Federal Reserve Bank of Philadelphia, Fed VIP William Dudley, the man overseeing markets for the Fed, identified five events during the recent sub-prime crisis that "that I never expected to seeever."
The events included what Dudley calls
"nearly a failed Treasury bill auctiontotal bids were barely sufficient to cover the amount the Treasury was offering. This near-miss occurred despite the fact that money market mutual fund investors were fleeing to rather than away from Treasury securities."..
(Excerpt) Read more at economicsbriefing.com ...
Why did my heart just drop???
Why would he make a speech like that, and broadcast that kind of information?
Clearly he’s in Al Qaeda’s pocket. Giving aid and comfort to the enemy.
It would seem that he’s in someone’s pocket, very deeply so.
Am I wrong in thinking that speech could start a sell off? Seriously, that scared me.
Here’s Dudley on his list of things he never expected to see:
Briefly, let me give you a few examples of events that I never expected to seeever:
AAA-rated mortgage-backed securities selling at 85 or 90 cents on the dollar,
asset-backed commercial paper backstopped by real assets and a full bank credit backstop yielding more than unsecured commercial paper issued by the same bankin other words, the real assets as collateral viewed by market participants as a negative rather than a positive,
3-month LIBOR (the interbank deposit rate in London for dollars) as high as 100 basis points above the fed funds rate targetcertainly possible if the monetary authorities were in the process of tightening monetary policy aggressively, but nearly inconceivable given the widely held expectation that the central bank would likely be cutting interest rates,
Treasury bill rates rising and falling 100 basis points in a single day,
and nearly a failed Treasury bill auctiontotal bids were barely sufficient to cover the amount the Treasury was offering. This near-miss occurred despite the fact that money market mutual fund investors were fleeing to rather than away from Treasury securities.
"If recession should threaten serious consequences for business (as is not indicated at present) there is little doubt that the Federal Reserve System would take steps to ease the money market and so check the movement."
---Harvard Economic Society, October 19, 1929
~~Ludwig von Mises
I can’t believe the lack of response to this.
People did not believe the Titanic could sink, it did. The only bright side to this is if the the treasury can borrow money maybe congress will have to cut spending.
He was commenting on events that have already transpired, so he’s giving the markets no new information. In any case, his commentary seemed to try to allay fears that the subprime crisis would spread to the rest of the economy. Why would this start a sell-off? And BTW, I don’t think a speech by *anyone* in history, including Fed chairmen, has ever started a sell-off.
It has been pretty much common knowledge that the administration has been pushing the NAU to the hilt. A key element of that agenda is the elimination of the dollar, to be replaced with the 'Amero.'
What part of this is hard to understand?
That auction scared the Fed. Finally...finally, the Fed realized that they had gone too far for too long being too tight on the money supply in their effort to burst the housing bubble.
The credit crunch had grown so severe that investors weren't even buying T-Bills!
Suddenly, the Fed decided that the screams from the Secondary Market about a "credit crunch" were real, after all.
Fed monetary policy eased mid-meeting after that point. I had already started my countdown to the point of no return being on October the 15th (had the Fed not injected money into the system prior to then, it would have been 1929 all over again).
The U.S. was pushed to the brink of economic collapse. It was a "near run thing" to quote a late Civil war general.
Nobody has ever nailed it better than the last knight of Liberalism.
Ok, in plain English, what does that mean?
the treasury auction (and a phone call from Goldman Sachs’s CEO) must be what caused Bernake to turn 180 degrees and lower rates
No, it wasn’t from Goldman Sachs...it was Countrywide borrowing its entire unsecured reserve loan balance that pushed the Fed back into reality.
Otherwise, the credit crunch would have continued until the whole system broke.
I read that the in the am Bernake was dead set againsty raising rates. He later got a call from the GS CEO, to be followed up by additional calls and meeting that day. Bernake flipped 180 in 8 hours.
Something major happened.
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