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Fed VIP: Treasury had "nearly a failed Treasury bill auction"
EconomicsBriefing.com ^

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 see—ever."

The events included what Dudley calls

"nearly a failed Treasury bill auction—total 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 ...


TOPICS: Business/Economy; Government
KEYWORDS: fed; tbills; treasurybill

1 posted on 10/18/2007 5:43:20 PM PDT by NaturalGorilla
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To: NaturalGorilla

Why did my heart just drop???

Why would he make a speech like that, and broadcast that kind of information?


2 posted on 10/18/2007 6:55:30 PM PDT by papasmurf (sudo apt - get install FRed Thompson)
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To: papasmurf

Clearly he’s in Al Qaeda’s pocket. Giving aid and comfort to the enemy.


3 posted on 10/18/2007 7:00:32 PM PDT by billybudd
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To: billybudd

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.


4 posted on 10/18/2007 7:14:46 PM PDT by papasmurf (sudo apt - get install FRed Thompson)
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To: NaturalGorilla

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 see—ever:

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 bank—in 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 target—certainly 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 auction—total 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.


5 posted on 10/18/2007 8:02:19 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Hydroshock
econoping.

"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


"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

~~Ludwig von Mises

6 posted on 10/18/2007 8:03:51 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: dennisw; bruinbirdman; eyedigress; Professional; kcar; editor-surveyor; rb22982; Last Dakotan; ...

Econoping.


7 posted on 10/18/2007 8:21:26 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Hydroshock

I can’t believe the lack of response to this.


8 posted on 10/19/2007 5:14:37 AM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee

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.


9 posted on 10/19/2007 5:39:40 AM PDT by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: papasmurf

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.


10 posted on 10/19/2007 6:29:06 AM PDT by billybudd
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To: papasmurf
"Why would he make a speech like that, and broadcast that kind of information?"

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?

11 posted on 10/19/2007 8:15:33 AM PDT by editor-surveyor (Turning the general election into a second Democrat primary is not a winning strategy.)
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To: papasmurf
"Am I wrong in thinking that speech could start a sell off? Seriously, that scared me."

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.

12 posted on 10/19/2007 8:31:18 AM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: Travis McGee

Paddle Faster.


13 posted on 10/19/2007 1:50:58 PM PDT by VxH (One if by Land, Two if by Sea, and Three if by Wire Transfer)
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To: VxH

No kidding!


14 posted on 10/19/2007 4:27:13 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee

Nobody has ever nailed it better than the last knight of Liberalism.


15 posted on 10/19/2007 6:20:48 PM PDT by kcar (HillCare 2.0: Freedom's deathbed)
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To: NaturalGorilla

Ok, in plain English, what does that mean?


16 posted on 10/19/2007 8:54:48 PM PDT by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: Southack

the treasury auction (and a phone call from Goldman Sachs’s CEO) must be what caused Bernake to turn 180 degrees and lower rates


17 posted on 10/19/2007 9:11:28 PM PDT by finnman69 (cum puella incedit minore medio corpore sub quo manifestu s globus, inflammare animos)
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To: finnman69

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.


18 posted on 10/20/2007 11:31:13 AM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: Southack

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.


19 posted on 10/20/2007 11:35:46 AM PDT by finnman69 (cum puella incedit minore medio corpore sub quo manifestu s globus, inflammare animos)
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To: Travis McGee
I can't believe the lack of response to this.

Don't worry--it got our attention.

I would like to know more.


20 posted on 10/20/2007 11:42:01 AM PDT by cgbg ("I give you health care and I say 'no smoking'". "Yass'm Miss Hillary.")
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To: finnman69

Post #18 describes the major event that happened. All else is internet rumor fodder.


21 posted on 10/20/2007 11:43:44 AM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: cgbg; Hydroshock

Ask to be put on Hydroshock’s econoping list.


22 posted on 10/20/2007 4:59:01 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Hydroshock

Please add me to your list. Thank you.


23 posted on 10/20/2007 5:21:29 PM PDT by DeaconBenjamin
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To: NaturalGorilla
The Fed cannot fight the effects of loose money with more loose money.

Lowering rates can only result in negative TIC flow reports and a collapsing dollar.


BUMP

24 posted on 10/21/2007 7:34:45 AM PDT by capitalist229
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