Skip to comments.Global credit system suffers cardiac arrest on US crash
Posted on 09/17/2008 8:21:03 PM PDT by TigerLikesRooster
Global credit system suffers cardiac arrest on US crash
By Ambrose Evans-Pritchard
Last Updated: 11:59pm BST 17/09/2008
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The global credit system almost grinds to a halt as yields on US Treasury bills reach zero for the first time since the Great Depression, writes Ambrose Evans-Pritchard
The global credit system came close to total seizure yesterday. Key parts of the derivatives market shut down and a panic flight to safety depressed the yield on three-month US Treasury bills to almost zero for the first since the Great Depression in 1934.
The closely-watched TED-spread measuring stress in the interbanking lending market rocketed to 238 as the share prices of Morgan Stanley, Goldman Sachs, Citigroup, Wachovia, and Bank of America all went into a tailspin yesterday. advertisement
The collapse in investor confidence is a harsh verdict on the judgment of the US Federal Reserve, which chose to ignore market pleas for a rate cut to halt what amounts to a modern-era run on the banking system. Almost none of the current Fed governors have market experience. Most are academic theorists.
(Excerpt) Read more at telegraph.co.uk ...
Yikes, what does it mean? Is this what the Fed bailout was about today?
this is right up your alley!
you love financial disasters,
and here it is.
Do you know if the Japanese stock market closed early?
Yahoo! Finance shows the last trade as having occured almost one full hour ago.
“The collapse in investor confidence is a harsh verdict on the judgment of the US Federal Reserve, which chose to ignore market pleas for a rate cut to halt what amounts to a modern-era run on the banking system”
How many rate cuts does Ambrose want? The Fed is caught between inflation and the markets’ constant demand for another dose of cheap credit.
They close for lunch.
lunch, i think 90 minutes they close
Can we throw 1/3 of Congress out this year?
ROTF. I had never realized they closed for lunch. That’s too much!
they eat for 5 minutes and nap for an hour and 25.
AS I PASS through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.
We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.
We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.
With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.
When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: "Stick to the Devil you know."
On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: "The Wages of Sin is Death."
In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: "If you don't work you die."
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.
As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will bum,
The Gods of the Copybook Headings will with terror and slaughter return!
It was actually over 300 at one point during the course of the day.
Mid-day break. Happens everyday.
While I’m not a huge fan of Bernanke in this mess, I will say that cutting the funds rate by 0.5% wouldn’t do much in this environment.
The simple fact is that banks don’t want to lend to each other. Setting the target rate for this activity is pretty futile if the banks won’t engage, or (if you look at the spreads) the market indicates that the Fed would be pushing on a string if they did lower rates.
The Fed cannot squander their credibility. If they cut the funds rates and the market doesn’t follow... the Fed has far bigger problems than they started with.
For now, the targeted lending programs are the better way to attack this problem.
And, I’d add, the way they handled AIG is better than what they’ve done before. They’re charging confiscatory rates (LIBOR+850bp) for that $85B. You could probably get a better rate from Tony, Sal and Luigi, albeit they probably don’t have $85 billion sitting around.
The spreads indicate just how bad the environment is right now.
The Fed is effectively no longer “the lender of last resort.”
They’re now the only lender in town.
The rate on three month Treasury bills went down to 0.02 today, a low not seen since 1941 !....
Many other credit rates are-or used to be linked to 3 month T-Bill rates, but this unhinges a lot of things, including us, and a lot of American workers...
It is serious...Shows the Fed has no control over interest rates on monetary policy with the dollar in the can...that’s like repairing a car with a sledgehammer and a screwdriver...lots of good those tools are...we need a strong spokesman who can inspire confidence...Instead we have three blind mice and a talking horse...
Will WaMu find a buyer? They appear to be next, otherwise. I'm not so sure that they're "too big to fail."
Isn't the return dependent upon the amount paid for the bond?
I figure these were bonds owned by private entities and the purchaser was looking for a place to "park" his institutional hundreds of millions of dollars.
They'll be back in the stock market when they think it's near bottom perhaps buying back the stocks at a price lower than they sold them.
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