Banks are quietly borrowing massive amounts of money from the Federal Reserve. Some people find this worrisome. [Reuters]
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Something wicked this way comes…
Uh oh.
The banks are borrowing thier reserves!!! Basically the are insolvent. So the Fed is trying to lower rates so the banks can become profitable again by borrowing short and lending long. The problem is that nobody wants to borrow anymore. This is called pushing on a string. The FDIC is preparing for a bunch of bank closures.
Alarmists.
People found it alarming in the UK when Northern Rock made arrangements to do the equivalent (take an emergency loan from the Bank of England), before the bank even took the loan. It caused a run on the bank, which lead to its collapse. Yet there’s no sign that it would have been a problem if people hadn’t panicked.
@Nickoli: You can’t run a bank if your savings/checking are negative, LOL!
I’m worried about this for a different reason. Heavy Fed borrowing tells me the banks trust the Fed more than they trust each other, so much so that they’d be willing to pay an interest rate premium to not have to deal with each other.
why is this surprising? the fed creates a low-interest method for banks to borrow money & they take advantage of it. THE HORROR!
i love how the article just reeks with journalistic integrity, though. “banks quietly borrowing money.” SHHH! don’t tell anyone!
No big deal.
Question is, can the banks pay it back? Are the banks themselves ‘sub-prime’ now?
Where does the Fed get all this money they keep giving to everyone?
@hi: They print it. Don’t you know the gubment can make money out of thin air? Jeez man, get with the times.
@hi: from us – that stupid rebate from the IRS will cost us in the not too distant future.
@howie_in_az: Yeah, but they don’t print and devalue willy nilly, silly.
This would be alarming if we lived in a country where a large number of people were given to alarmist, knee jerk reactions to things they read in the newspaper. Fortunately, the thing that separates us from our former masters in London is that no one here reads newspapers.
As to Alarmist, Knee Jerk Reactions, we’d have invented it, if Europe didn’t have a couple thousand years of history before us.
If the television news can explain the problem here in under 30 seconds, the mattress might start looking like a good investment strategy.
We need some of the smart people from the subprime thread to comment here.
nrwfos: yes, but it will hurt us during the next administration, which was kinda the point all along.
@hi: China. Same place everything else comes from.
Money doesn’t come out of thin air. They make money out of thin cotton and linen.
@PotKettleBlack: just make sure you’re filling it with gold bullion. at this point, i’m not too sure that replacing mattress filler with u.s. money is all that great of an idea – the filler may prove to be more valuable in the near future. XD
@mac-phisto: “quietly” means they didn’t send out a press release and the journo didn’t stumble upon the story until a month later.