Fed Gave Banks Crisis Gains on $80 Billion Secretive Loans as Low as 0.01%

Quote from S2007S:

Exactly fucking right, that's the entire problem, no one cares but a few handful of people about whats really going on....its really pathetic to see this kind of news go totally unnoticed by millions of people. As you said more people are interested in such worthless dribble that the real news that's out there such as this news about billions of dollars in secretive loans will continue to go unnoticed just like all the rest of the news about whats really going on behind this biggest bailout in history still unfolds.
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No, I think a lot of people care.

Its just that most are too busy being foreclosed on and having to move their stuff out and figuring out where their kids are going to go to school now. :D

As for American Idol and gossip crap - that is what the media feeds the airwaves, not necessarily what people really want.

Its like when commentators say "The Federal Reserve needs to remain politically independent!" Well, who ever proved they actually ARE? Its just a mantra that gets repeated without thought, like planting an idea that is never to be disputed.

The media is trying to be an opiate to dull people's perceptions, but all it does is piss people off.
 
the day before 9/11 rumsfeld told on air that 2.3 trillion is missing from pentagons books.

nobody cares.

and on sep 11 something crashed into pentagon, dep. of accounting. certainly, not the commercial airliner.
 
I'm just curious whether anyone actually bothered to calculate just how much of a "subsidy" to the banks this was?

There's a lot of outrage, so I'm curious what sorts of numbers people are thinking about. What's the estimate? Did the Fed give banks trillions, billions or unthinkable bazillioons?
 
Quote from Martinghoul:

I'm just curious whether anyone actually bothered to calculate just how much of a "subsidy" to the banks this was?

There's a lot of outrage, so I'm curious what sorts of numbers people are thinking about. What's the estimate? Did the Fed give banks trillions, billions or unthinkable bazillioons?
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Not quite sure I understand exactly what the outstanding notional, duration, or actual cost was - though gorilla math shows:

$80B x .49%/12 x 10 = ~320 Million

...makes LTCM seem like a big deal? Also, to your point, it's an opportunity cost as opposed to some other 'bailouts', no?
 
Quote from Soon2Bgreat:
Not quite sure I understand exactly what the outstanding notional, duration, or actual cost was - though gorilla math shows:

$80B x .49%/12 x 10 = ~320 Million

...makes LTCM seem like a big deal? Also, to your point, it's an opportunity cost as opposed to some other 'bailouts', no?
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Well, it's actually quite a bit less than that, but your calculation is roughly along the right lines. An $80bn 1m loan has a DV01 or about $660k/bp. Let's use December 08 as a representative period. Arnd that time the prevailing mkt rate was arnd 20bps (I use 1M FF OIS, which is conservative, as OIS is unsecured, whereas the Fed always lends against collateral). The lowest rate given in the article is 1bp, which gives us the "Fed subsidy" in basis points, 19bps. Using this 19bps on the DV01 of the whole $80bn worth of loans gives us ... $12.635mil. Now as I said, this is a conservative estimate, but suppose we make it even more conservative and use a differential of 49bps, rather than 19bps (given the article helpfully points out that the Fed's Discount Window facility lends at 50bps). That raises our very conservative estimate of the "Fed subsidy" to $32.585mil.

So, basically, the Fed lent money to the banks to support liquidity and prevent further deterioration of the money mkts at the "cost" of about 0.13% of TARP (using the CBO estimate). Alternatively, the cost of this program was arnd 0.04% of the Fed remittance to the US Treasury for the fiscal year 2010 (if my arithmetic works).

At any rate, I certainly think that in hindsight the whole cloak and dagger sh1te should have been avoided. However, I can only imagine how scared they must have been back then. Moreover, I am certainly not happy that the international megabank cartel is the only way by which liquidity can be injected into the mkt, but that's, unfortunately, the world we live in. There doesn't appear to be any will to reform the financial system and to fix the TBTF issue, which means that the banks will always have the taxpayer over a barrel when push comes to shove.
 
Quote from Martinghoul:

Well, it's actually quite a bit less than that, but your calculation is roughly along the right lines. An $80bn 1m loan has a DV01 or about $660k/bp. Let's use December 08 as a representative period. Arnd that time the prevailing mkt rate was arnd 20bps (I use 1M FF OIS, which is conservative, as OIS is unsecured, whereas the Fed always lends against collateral). The lowest rate given in the article is 1bp, which gives us the "Fed subsidy" in basis points, 19bps. Using this 19bps on the DV01 of the whole $80bn worth of loans gives us ... $12.635mil. Now as I said, this is a conservative estimate, but suppose we make it even more conservative and use a differential of 49bps, rather than 19bps (given the article helpfully points out that the Fed's Discount Window facility lends at 50bps). That raises our very conservative estimate of the "Fed subsidy" to $32.585mil.

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Agreed, was just multiplying by 10 since they said March-December (maybe still wrong). Either way, you make a good point for both points of view. Thanks.
 
You can google this info and it seems to be out there on the web back as early as 09. Maybe we're not talking about the same thing.

Example.

New York Fed:

“On March 7, with spreads between 1-month Treasury repo and 1-month Agency MBS repo having reached as high as 140 basis points, the Desk began to initiate a series of 1-day forward 28-day single-tranche RPs.6 This 28-day RP book grew to $80 billion over the course of the year (Chart 6). These operations were intended to narrow the 1-month repo spread between Treasury and Agency MBS collateral and provide the primary dealers a steady financing source for Agency MBS. In response, the spread eventually narrowed to about 20 basis points, close to historical norms.”[1](Via Prins)



“In 2009, the Fed offered a total of $80 billion for short-term loans to holders of mortgage-backed securities."
 
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