[Alberta's Child]

Where do you think the banks are putting this money? They are putting into stocks for one simple reason. The only way they can get out of the pickle they are in is to raise the price of their shares and thus increase the amount of equity they have. A rising stock price does exactly that. The banks are in essence investing inthemselves in order to make themselves look more healthy. This is all being down with the full blessing of Ben Bernanke and his buds at the Fed. The stocks of financials have risen more on a % basis than about any class of stocks, ask yourself how banks on life support a year ago are now suddenly healthy.

Actually, I think you are wrong about this. I believe banks are parking their TARP cash in U.S. Treasury bills -- which explains why interest rates in the U.S. are so low these days even though the Federal government is running an enormous budget deficit.

[milwguy]

Only part of their cash. Not all. It makes sense because the gov’t is giving them money for free and then borrowing it back and paying interest.

If you look at the Treasuriy auctions lately, it shows ‘indirect’ parties are buying an increasing amount of the debt. The MSM trys to portray this as meaning central banks of other countrie are soaking up the debt, but in reality a large part is banks doing the gov’t bidding.

[milwguy]

Sept. 10 (Bloomberg) — The Treasury Department’s $12 billion sale of 30-year bonds may draw a yield of 4.289 percent, according to the average forecast of seven bond-trading firms surveyed by Bloomberg News.

The auction is a reopening of the record $15 billion 30- year bond sale on Aug. 13, and the securities mature in August 2039. They yielded 4.305 percent in pre-auction trading. Bids are due by 1 p.m. New York time.

The August sale of the so-called long bond drew a yield of 4.541 percent, the highest in two months. The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount sold, was 2.54, compared with 2.36 at the July auction. The average ratio for the past 10 sales is 2.31.

Indirect bidders, the class of investors that includes foreign central banks, bought 48.1 percent of the notes at the August sale, down from 50.2 percent at the previous sale. The average for the past 10 auctions is 34.5 percent.