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Fed bends rules to help two big banks (Fed. Res. to benda fundamental principle in banking regs.)
http://money.cnn.com/2007/08/24/magazines/fortune/eavis_citigroup.fortune/index.htm?postversion=2007 ^
| 8-24-07
| Peter Eavis
Posted on 08/25/2007 5:04:49 AM PDT by Hydroshock
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To: Hydroshock
Will someone explain what all this means.
2
posted on
08/25/2007 5:09:04 AM PDT
by
blam
(Secure the border and enforce the law)
To: Hydroshock
Federal Reserve agreed this week to bend key banking regulations to help out Citigroup... I need a $10 million loan and I have this large box for collateral. I know that it smells like cr*p, but..., "trust me", it is filled with very valuable mortgage obligations!
3
posted on
08/25/2007 5:12:31 AM PDT
by
ExSES
(the "bottom-line")
To: blam
I think it means that the fed is trying to do everything it can to prop up the banking sector with out doing a rate cut. They still think as I do that inflation is a real worry. And they are trying to ease pressure to get liquidity up without adding to inflation with a rate cut.
4
posted on
08/25/2007 5:12:32 AM PDT
by
Hydroshock
("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
To: Hydroshock
I think I would make any federal assistance to one of the sub-prime lenders contingent on them working with their customers to help them keep their homes out of foreclosure. What’s happening now is people are defaulting and the feds are stepping in to keep the lender out of bankruptcy. That’s great for the lender and the lender’s shareholders, but it does nothing for the borrower. I am against any bailout schemes to help those who got themselves into hot water with these Venus Fly Trap mortgages, but if the insist on ignoring my advice then I want the guy at the bottom of the food chain to get help too.
5
posted on
08/25/2007 5:13:29 AM PDT
by
jwparkerjr
(Sigh . . .)
To: ExSES
What we have here is shaping up not to be a liquidity problem but a problem with banks hold a lit of paper no one wants. To illustrate if you hare selling oranges and have a good deal on good oranges, but I do not want oranges they you do not get any money. It is not that I have no money, I just choose not to spend it on your wares.
6
posted on
08/25/2007 5:15:04 AM PDT
by
Hydroshock
("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
To: blam
Citigroup is central in the drug/ money laundering operations of the US Government. They are a National Interest asset and too important to let go under.
7
posted on
08/25/2007 5:15:12 AM PDT
by
taxed2death
(A few billion here, a few trillion there...we're all friends right?)
To: Hydroshock
8
posted on
08/25/2007 5:16:09 AM PDT
by
Oystir
To: jwparkerjr
Like the S&L bailout the object is to cover the lenders not the borrowers. ANd there is a real danger you and I as taxpayers will pay for part of this. There already have been high placed voices calling for a government bailout.
9
posted on
08/25/2007 5:16:51 AM PDT
by
Hydroshock
("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
Comment #10 Removed by Moderator
To: Lizarde
It is very telling. But I do have doubt if Citi, WaMu, BofA, Wachovia, and Wells Fargo will go under. They ahve other revenue streams. But I do expect them to feel the effects of their bad loans adn hear of more lay offs.
11
posted on
08/25/2007 5:24:48 AM PDT
by
Hydroshock
("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
To: Hydroshock
I think it means that the fed is trying to do everything it can to prop up the banking sector with out doing a rate cut. They still think as I do that inflation is a real worry. And they are trying to ease pressure to get liquidity up without adding to inflation with a rate cut. Tell me if I'm wrong, but when the Fed "loans" money. It is increasing the amount of money in circulation by printing more, and if this is done when there is no need to cover an increase in economic output, it too fuels inflation. A higher interest rate is a brake on this, but too much lending would still produce inflation.
12
posted on
08/25/2007 5:27:47 AM PDT
by
SampleMan
(Islamic tolerance is practiced by killing you last.)
To: Hydroshock
The regulations in question effectively limit a bank's funding exposure to an affiliate to 10% of the bank's capital. But the Fed has allowed Citibank and Bank of America to blow through that level. Citigroup and Bank of America are able to lend up to $25 billion apiece under this exemption, according to the Fed. If Citibank used the full amount, "that represents about 30% of Citibank's total regulatory capital, which is no small exemption," says Charlie Peabody, banks analyst at Portales Partners.
The Fed says that it made the exemption in the public interest, because it allows Citibank to get liquidity to the brokerage in "the most rapid and cost-effective manner possible." The size of this does surprise me. That's real money, even for Citibank.
I would assume that the Fed is seeing something here that would warrant such exceptional lending.
To: Hydroshock
“And they are trying to ease pressure to get liquidity up without adding to inflation with a rate cut.”
I still think this is insolvency not liquidity that is the problem. Throwing all the money in the world and there’s a world of money out there, to solve the crunch is not going to solve the problem when the rules of lending have changed dramatically.
I wonder if TXU is a go or is the new lending world finally looking at outcomes?
14
posted on
08/25/2007 5:29:44 AM PDT
by
OpusatFR
To: Hydroshock
I think it means that the fed is trying to do everything it can to prop up the banking sector with out doing a rate cut. You're right, but this is more about protecting their egos than inflation.
15
posted on
08/25/2007 5:30:07 AM PDT
by
Moonman62
(The issue of whether cheap labor makes America great should have been settled by the Civil War.)
To: Lizarde
The brokerage part of citi is Smith Barney and the private bank; both quite healthy.
16
posted on
08/25/2007 5:30:39 AM PDT
by
Oystir
To: Moonman62
This is why I do not expect to see a rate cut in Sptember.
17
posted on
08/25/2007 5:32:30 AM PDT
by
Hydroshock
("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
To: snowsislander
I would assume that the Fed is seeing something here that would warrant such exceptional lending. I imagine the banks are telling the Fed explicitly what's going on.
18
posted on
08/25/2007 5:34:01 AM PDT
by
Moonman62
(The issue of whether cheap labor makes America great should have been settled by the Civil War.)
To: SampleMan
Tell me if I'm wrong, but when the Fed "loans" money. It is increasing the amount of money in circulation by printing more That is correct! It is a mere "coincidence" that M3 data is no longer available! Pay no attention to the man behind that curtain!!!
19
posted on
08/25/2007 5:34:21 AM PDT
by
ExSES
(the "bottom-line")
To: Hydroshock
They’ll hold off until reality smacks them in the head.
20
posted on
08/25/2007 5:35:49 AM PDT
by
Moonman62
(The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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