Will someone explain what all this means.
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.
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.
They’re letting the banks loan more money to their brokerage subsidiaries in order to pump more money into Wall Street.
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.
The huge market of loans to illegal aliens (undocumented loans) has snuck up on the Fed. They didn’t realize that the estimated 12 million illegals is a myth, that the real number of illegals is near 50 million. They buy houses, cars, and have huge credit card balances and commit crimes with phony baloney names and social security numbers. Then they skip out on the house of cards they have built on credit and move to another city or state, adopting new identities and get new loans to start anew. The banking system is taking a big hit from the sieve of a border with Mexico. The illegals are learning to take advantage of the loose identity/easy credit game we play in America. We are doomed until we round them up and close the border.
“Will someone explain what all this means”
They can’t meet their depository requirement which I believe is 3.5% of deposits.
Thats how the banks forced the S&Ls into insolvency when they were encroaching on their business was by raising the depository requirement.
Since the 11 member banks hold the majority of the seats on the Federal Reserve they call the shots.
BofA is the board member for the 11th district so guess what they voted to save their skin when by rights BofA should have been shut down.
First, you've got to see the process. There's a mortgage originator out there. He loans you money for a home. Heck, he loans money to lots of people for lots of homes.
Then he packages the loans that he made this month. Each group of loan packages is then "wrapped" in both a third party insurance protection as well as a repurchase guarantee (i.e. if the Loan Originator is selling bad paper hiden inside these packages, the new Buyers have 6 months or so to find out and make him buy his own loans back at full price).
Now he sells those packages on Wall Street. Wall Street runs a Secondary Market that buys all sorts of debt instruments. People with cash want to trade their cash for income-producing pieces of paper.
This sale then gives him the funds to make new home loans.
OK, are you with me so far?
Well, the Loan Originator arm of Bank of America has run into a problem; people aren't buying their old loans on the Secondary Market.
This means that BofA's mortgage division (or whatever commercial paper branch) has to hold all of their old loans *and* that they have to use more of their own cash to fund the new loans that they are making.
Which just about doubles their investment in this area...putting them over the Fed's caps for how much of the bank can be invested in any one area (e.g. the 10% cap referred to in the article above).
So unless the Fed wants BofA to cease making new mortgage loans (and perhaps even cease making new commercial business loans as well), something has to give.
Should major lending institutions like BofA and CitiGroup stop making commercial loans and mortgages, then a substantial portion of our "Just In Time" economy would immediately grind to a catastrophic halt.
Businesses that were well run, through no fault of their own, would see their credit disappear. They would die.
International competition has forced U.S. businesses to operately leanly, so fast growing businesses do not grow with their own cash, but with credit. If the credit was unexpectedly cut-off, thousands of U.S. businesses employing millions of Americans would have to close their doors within two weeks because they would run out of cash to pay their bills and employees, even though they are profitable, well-run, and share no part of the sub-prime fiasco's culpability.
And Congress/White House and the American People would look unkindly upon the Fed if that situation was allowed to reoccur (last happened in 1930).
So the Fed isn't going to let BofA and/or Citigroup stop making business loans and mortgages due to some regulation that limits each bank's self-investment to 10%.