Posted on 08/25/2007 5:04:49 AM PDT by Hydroshock
NEW YORK (Fortune) -- In a clear sign that the credit crunch is still affecting the nation's largest financial institutions, the Federal Reserve agreed this week to bend key banking regulations to help out Citigroup (Charts, Fortune 500) and Bank of America (Charts, Fortune 500), according to documents posted Friday on the Fed's web site.
The Aug. 20 letters from the Fed to Citigroup and Bank of America state that the Fed, which regulates large parts of the U.S. financial system, has agreed to exempt both banks from rules that effectively limit the amount of lending that their federally-insured banks can do with their brokerage affiliates. The exemption, which is temporary, means, for example, that Citigroup's Citibank entity can substantially increase funding to Citigroup Global Markets, its brokerage subsidiary. Citigroup and Bank of America requested the exemptions, according to the letters, to provide liquidity to those holding mortgage loans, mortgage-backed securities, and other securities.
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Conrad DeQuadros of Bear Stearns offers perspective on the Fed's interest rate decision and the reaction on Wall Street. Play video
This unusual move by the Fed shows that the largest Wall Street firms are continuing to have problems funding operations during the current market difficulties, according to banking industry skeptics. The Fed's move appears to support the view that even the biggest brokerages have been caught off guard by the credit crunch and don't have financing to deal with the resulting dislocation in the markets.
(Excerpt) Read more at money.cnn.com ...
Calls to mind the old line:
"If I had understood anything that you just said I might still be a virgin"
.
They’re letting the banks loan more money to their brokerage subsidiaries in order to pump more money into Wall Street.
Hope you’re wrong. BofA is a great company. I just added some BAC to my portfolio, during last week’s “back to school” stock sale.
I think they'll cut ... how much they'll cut is the question
.
I am sure that they are.
However, the Fed must share a strong perception that this is necessary, because it is a significant departure in my opinion from any normal course of action.
From your mouth to CNN's ears.
http://prudentinvestor.blogspot.com/2005/11/unpleasant-trend-fed-counters-by.html
The Fed isn’t perceptive at all. Every six or seven years it does significant economic damage with interest rates, and is the last to see the resulting problems.
It doesn't FUEL inflation - it IS inflation. What it fuels are the effects of inflation, higher prices for products and labor.
We’ve got the mortgage crunch, record high gas prices, “hidden inflation” locked up like a crazy uncle in the basement, and the dollar get the snot beat out of it overseas ...if Wall Street takes a header, then folks might start to get genuinely worried.
Increased money supply isn't inflation in itself. Prices must rise and the Fed can't raise prices. Thus excessive supply technically only leads to it.
Ihey don’t need loans and don’t have subprime exposure. The article is misleading; but that is the msm these days.
If you do see a cut it will be teh smallest one possible. Not a huge 1% many want.
Now the federal reserve (which ain't Federal, by the way) is helping the big boys.
You are now figuring this out.
There is another important aspect here. Freddie Mac and Fannie Mae buy the good mortgages and they are maxed out. Bush says that Congress must pass reforms before he would consider raising their limits. Apparently, these reforms have been stalled. One of Cavuto’s experts said that they were created to buy mortgages and provide liquity, but right now they are closed. would it surprise you to learn that the government screwed up?
It means that the Federal Reserve is showing again why it is a corrupt and evil entity that should never have been established, and why it will eventually completely bankrupt this country..
But that is my humble tin-foil-hat theory...
But in simple terms - the Feds are allowing these banks to break the rules regarding how much money they can lend themselves (a rather shady business practice the way they do it) to keep their own subsidiaries “liquid”. You see, the banks made many bad decisions (mostly bad loans) and now they are short of money and risk their own defaults. So they need more cash via their parent companies beyond what is legal...so the Federal Reserve is going to allow them to break the rules.
Kind of think of it as you are late on your car payment and your house payment and don’t have the funds to meet those bills. So you write yourself a check for the amount needed, deposit it and write checks off that deposit (makes sense, huh????heheh). Kind of like the consumer practice of kiting. Not smart.
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