"BOOM!" (More Obfuscation)

The Market Ticker ^ | 7/1/09 | Karl Denninger

[FromLori]

"Someone" paid 7% for overnight money on the Fed Trading system last night (that "someone" was a bank, by the way.)

This will be claimed to be "ordinary" end of quarter distortions for closing the books.

Don't believe it for a second.

Let's put this in plain language: The discount window is open for any bank that has good collateral at less than 1/10th of that interest rate.

Therefore there is absolutely no reason for any institution to go into the Fed Funds market for overnight money at 7% unless they have no good collateral to post against it and thus cannot go to the window.

So who is it? No idea. And while the amount borrowed overnight at that rate may be tiny, that's not the point - the point is that the last time we saw anything that dramatic was just before it all went "boom" last year.

Yes, I'm sure that end-of-quarter had something to do with it. In fact, I'd be stunned if it did not.

However, as I noted, there's no reason for anyone to pay that if they have good collateral to post at the discount window, given that you can do so for 1/10th or less the price.

Keep your nose to the ground and your eyes open.

Someone (or more than one someone) is in trouble.

[FromLori]

http://www.newyorkfed.org/markets/omo/dmm/fedfundsdata.cfm

[FromLori]

http://benbittrolff.blogspot.com/2009/06/aig-ready-to-blow-up-again.html

[KoRn]

I was reading over there on the tickerforum that every time something like this happened recently, shit has hit the fan. If I had lost a bunch of money in the markets early this year, I think I would cut my loses now, and head for the exists before it happens again.

[FromLori]

I already did that a while back I do not trust it at all. See the aig article? hmmmm

[farlander]

So get yourself a good CTA with a total return strategy and watch thme make a killing shorting S&P index futures

[Costumed Vigilante]

We are due for several more economic catastrophies: 2nd derivative collapse, 1st commercial property value collapse, coordinated economic warfare by our emboldened enemies.

This is the beginning of at least one of them.

A verbis ad verbera

[FromLori]

The Case for Economic Depression, Credit Destruction

http://www.marketoracle.co.uk/Article11720.html

[KarlInOhio]

Alternative possibility: Someone wanted to create a panic (or at least uneasiness) by looking like borrowing had to be done at 7%. It might be illegal to yell "FIRE" in a crowded theater, but you can get away with saying "is that smoke I smell" to get people to leave so you can get a better seat.

I don't know who might be right, but I wouldn't be surprised to see some end of the quarter manipulation to boost asset values for a quarterly report.

[AliVeritas]

ping

[FromLori]

Lots of market manipulation going on so that is a distinct possibility.

[Costumed Vigilante]

The Case for Economic Depression, Credit Destruction

Good riddance. Humanity thrives and grows on productivity, risk, and innovation, not debt and a faux government-mandated status quo.

Adios fiat currency. Adios fiat lifestyles.

Ahoy 2nd Renaissance.

A verbis ad verbera

[taxtruth]

You are totally correct.Someone/something has been manipulating the market for about 18 months.They don't make sense.

[FromLori]

http://zerohedge.blogspot.com/2009/07/themis-trading-principal-program.html