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Goldman Sachs really needed the new emergency loan window?
- Thread starter seasideheights
- Start date
Quote from Tommy Ryan:
Being able to borrow at the window with all sorts of newly eligble collateral (down as low as BBB and even private label mortgages) has made a real difference. If there are no major blow ups (a few small hedge funds blowing up don't count) to endanger the system over the next ten days or so the immediate "Bear Stearns Crisis" will be over. Leaving the other credit, mortgage and housing issues to worked out over many months.
Excellent point.
I would tend to agree with all of the above.
Quote from frank grimes:
Sp were robbing peter to pay paul, and then just for shits and giggles paul robs peter AGAIN, sans the courtesy reach around. You have to love the way we do business here. yikes.
Frank ...
I obviously agree that Peter and Paul have been robbing each other for a long, long time. And those who charaxterize the bubble on top of bubble as a vast Ponzi scheme are also correct. Yet I part company with the many observers who believe that any of these techniques are new or even modern.
Dillion Read & Co. used junl bonds in the 20's and by all accounts juggled over 220 million dollars in fees from Goodyear tire over a five year period. That's $220,000,000 million in 1920's dollars.
The Medici were accused -- rightly so -- of propping up markets in 14th century Florence in order to hide their own temporary insolvency.
Financial markets have, to a great extent, involved long periods of musical chairs and the biggest defaults frequently occur in the world's leading commercial/industrial powers. The others can't get the gagantuan credit lines to make the party really rock.
Many of us employ enormous leverage (particularly on our futures trabsactions) and are card carrying junior members of the club. The key for me is for Tommy listen to the music intently enough to always have a chair when the music pauses and, hopefully to either be long dead or wisely out of the game if and when it stops.
BTW ... the last time it actually stoped for prolonged period in the West, in my opinion, was the Dark Ages. Examine charts from the 30's (particularly '32 & '33 and you'll walk away dying to have the opportunity to trade such lucrative markets.
Quote from Tommy Ryan:
demoship ...
You joke about bills potentially trading at par but I actually remember when the Swiss Franc was "too strong" in the 70's and demand deposits inside Switzerland carried a -2% rate.
When our bank in Zurich explained we'd actually have to pay the negative two points annualized I actually thought they were joking. Then I realized that it's an oxymoroon to think of a Swiss banker joking.
We kept our balances quite low -- just enough to meet short term operating expenses -- but did pay the juice.
I also remember when Turkey went to 1,200% on overnight money a few years back to squeeze the shorts. The extremes do happen.
If you actually had to PAY to keep deposits at a bank, why wouldn't you just keep cash in a safe deposit box?
Quote from demoship:
If you actually had to PAY to keep deposits at a bank, why wouldn't you just keep cash in a safe deposit box?
Because my partner and I were running a small investment firm -- we had payroll, rent, expenses and a clearing arrangemnt. Can't run to the bank to pay for positions in cash on settlement day.
An annualized two points ammounted to quite a small sum in the scheme of things ... probably no more than our phone bill in the days of extrodinarily high rates for international calls.
When you do business on a scale safe deposit boxes don't work.
Quote from demoship:
If you actually had to PAY to keep deposits at a bank, why wouldn't you just keep cash in a safe deposit box?
On a related topic can someone explain to me how negative interest rates work if you were to borrow money? Ive asked this question before and i was told the answer was revaluation but i still do not understand.
For example regardless of the change in what your money buys if you borrowed x dollars and kept those x dollars under your mattress you would earn interest on those dollars and be able to pay back the loan at any time. I am obviously missing something.
Mr. Tommy Ryan, you are a great burst of sunshine, your knowledge about history will be most welcome here. Maybe we can go back to actually having discussions about our profession, this place has turned to crap...
Quote from n00b7r4d3r:
On a related topic can someone explain to me how negative interest rates work if you were to borrow money? Ive asked this question before and i was told the answer was revaluation but i still do not understand.
For example regardless of the change in what your money buys if you borrowed x dollars and kept those x dollars under your mattress you would earn interest on those dollars and be able to pay back the loan at any time. I am obviously missing something.
It's actually quite simple. The bank is REQUIRED by the government to charge you the two points annualized if you insist on keeping Francs in a Swiss deposit institution. They don't want people to continue to push their currency higher so they make it very profitable for people to use the Franc as the borrowed )and then sold) currency in a carry trade.
The spread becomes something like negative two points bid for your Francs and a positive one point offered. The spread is wide, the lenders take few if any chanes on risky credits and their domestic economy cools off in the short term and over time the Franc stops appreciating ... at least thats the Swiss National Bank's strategy. And in this instance the plan worked.
Quote from Tommy Ryan:
It's actually quite simple. The bank is REQUIRED by the government to charge you the two points annualized if you insist on keeping Francs in a Swiss deposit institution. They don't want people to continue to push their currency higher so they make it very profitable for people to use the Franc as the borrowed )and then sold) currency in a carry trade.
The spread becomes something like negative two points bid for your Francs and a positive one point offered. The spread is wide, the lenders take few if any chanes on risky credits and their domestic economy cools off in the short term and over time the Franc stops appreciating ... at least thats the Swiss National Bank's strategy. And in this instance the plan worked.
Is it invalid to say that swiss person could go out and get a loan for 99999999999999 francs; keep those francs and live off the interest (if the rate for borrowing was negative)? Take for example the CNY bid and ask which are both negative:
https://fx1.oanda.com/user/interestrate.html
Quote from Tommy Ryan:
their domestic economy cools off in the short term and over time the Franc stops appreciating ... at least thats the Swiss National Bank's strategy.
n my last post I meant to say their cooling economy is stimulated in the short term (their watches had become incrediblt expensive and the world had stopped buying them) and over a short period of time the Franc stops appreciating.