Bloomberg have released a Christmas cracker for investors this morning, under the USA Freedom of Information Act they’ve obtained the detail on the loans made to the banks and various financial institutions from when the banking system began to implode in 2008-2009. I’ve provided a link to the main body of the information, but it’s worth concentrating on a few of the salient numbers in order to get a feel for the size and scope of the support.
Just how deep the rabbit hole went is truly breath-taking and terrifying in equal amounts. When you consider the ‘headline’ figure for USA unemployment is still at a stubborn 9%, GDP growth at 1.8%, the debt ceiling months away from busting through it’s revised circa $17 trillion level, there are 46 million USA citizens on the food stamps programme, 1.6 million homeless and States and cities are bankrupt you do begin to wonder what’s actually been achieved (since 2008) with this gargantuan support package?
Has a banking system stabilisation been worth this level of debt and support, when the citizens of the country are worse off? The counter argument is that we (apparently) have no idea how much worse the economy and as a consequence individual lives would have been had the USA govt. and the Fed not stepped in. However, the rebuttal to that counter argument is that the USA would now be over the worse and the rest of the global banking system, in Europe and the USA, might not lie in ruins. Three-four years on, cleansed of the financial virus after a healthy purge, collectively we, as global citizens, may have been experiencing a brighter dawn and a far brighter future had the ‘too big to fails” been allowed to fail..
Bloomberg has this morning released spreadsheets showing the daily borrowing totals for the 407 banks and companies that tapped Federal Reserve emergency programs during the 2007 to 2009 financial crisis.
Bloomberg News obtained the information on the ‘discount window’ and ST OMO (short for single-tranche open-market operations) through the Freedom of Information Act. The Fed rejected the request, Bloomberg LP then filed a federal lawsuit to force disclosure and won the case. In March 2011, the U.S. Supreme Court chose not to intervene and the Fed released more than 29,000 pages of transaction data.
The Numbers
$1.2 trillion – The Fed’s actual lending to banks and financial companies at its single-day peak, Dec. 5, 2008, through the seven programs Bloomberg News studied in depth.
$1.5 trillion – The Fed’s own number to represent its peak lending. This included foreign-currency liquidity swaps. Under the swap lines, the Fed lends dollars to foreign central banks, which in turn lend the money to local banks. Only the names of central banks involved in the transactions have been made public.
$7.77 trillion – The amount the Fed pledged to rescue the financial industry. This number represents potential commitments, not money out the door, was first published in March 2009, when it peaked.
$6.8 trillion – The potential amount the Fed might have lent if “all eligible program applicants request assistance at once to the maximum permitted under the program guidelines,” according to a July 21, 2009, report by the Treasury Department’s Special Inspector General for the Troubled Asset Relief Program, or TARP.
$16 trillion – The “total transaction amounts” for Fed lending included in a July 21, 2011, study by the Government Accountability Office. The Fed’s Dec. 6 memo said it was inaccurate to describe that amount as the total of its lending and guarantees.
$1.14 trillion – A different total for Fed lending that the GAO included in the same July 21, 2011, report. The GAO accounted for differences in loan terms by multiplying each loan amount by the number of days the loan was outstanding and then dividing by the number of days in a year. Bloomberg’s figure represents peak lending on a single day.
Are we any clearer on what the rescue total is/was, how much the USA tax payer is on the hook for, how much of the rescue fund has been ‘burnt’ through, how much ‘ammo’ the Fed has left? Well it’s no longer as clear as mud and doubtless the more iconoclastic publications within our forex community will dissect, analyse and opine on the info. but for now Bloomberg’s tenacity, which should be applauded, has provided some seriously chewy ‘meat on the bone’ that’ll take some time to digest..
http://www.bloomberg.com/news/2011-12-23/fed-s-once-secret-data-compiled-by-bloomberg-released-to-public.html
Source: FX Central Clearing Ltd, (FXCC BLOG)
http://blog.fxcc.com/st-omo-the-beatification-of-the-fed-may-take-some-time/
Market Commentary by FXCC - All Your Cash, Are Belong To Us Mario Monti Takes On The Italian Cash Society
“All your base are belong to us” (often shortened to “All Your Base”, “AYBABTU”) is a broken English phrase that became an Internet phenomenon in 2000–2002. The text comes from the opening cutscene of the 1991 European Sega Mega Drive version of the video game Zero Wing which was poorly translated from Japanese…
It’s only taken the former (if there is ever such a thing) Goldman Sachs banker and now unelected technocratic Italian Prime Minister a month to threaten Italians with regards to their cash economy. Not even Silvio dared to adopt such an breath taking reforms, although he had his personal reasons for his preferences and cash paying history. Mario Monti quickly realised that the Italians love affair with their lire now extends to the euro. Despite their distrust of banks being amplified during the current crisis he’s beginning to issue autocratic diktat regarding the cash society that lives, breathes and is at the heart of the Italian economy. The government on Dec. 4 reduced the maximum allowed cash payment to 1,000 euros from 2,500 euros.
Italy apparently loses more than 120 billion euros in unpaid taxes every year, according to the Italian tax collection agency. The country spends circa 10 billion euros annually on security and labor in order to process cash transactions, according to the Italian banking association, the ABI.
Monti is now focusing on curtailing evasion as one way to reduce Italy’s 1.9 trillion-euro debt, which is bigger than Spain, Greece, Ireland and Portugal’s combined. Investor concern that Italy remains at risk of being overwhelmed by the region’s debt crisis pushed the country’s borrowing costs to euro-era records last month.
However, a money grab of the cash in society must be irresistible to a confirmed banker who no doubt sees billions of turnover in the cash society and wants it to be continually washed through the banking system, as part of the ‘healing’ process for a crippled economy and country.
Italians are the euro region’s least-indebted consumers and among its biggest savers, according to Eurostat. data from the European Union’s statistics office. Their frugal nature is linked to a distrust of paying with anything other than cash. Italian credit-card holders use their cards on average only 26 times per year, or five times less than in the U.K., according to the Bank of Italy. And who could blame Italians for not trusting the banking system during the current malaise? With interest rates at less than one percent putting cash to work is seen as a sensible basic street level hedge versus inflation. A culture of investing in the equities market doesn’t exist in Italy in comparison to for example the UK and USA, and if it did Italians would find their investments, if tracking the MIB index, down by 27% year on year.
But now Monti has made the public “an offer they can’t refuse”, by criminalising cash transactions of more than €1,000, he’s increased distrust and heightened suspicions as to his real motives as opposed to engendering the support he desperately needs. There’s no direct translation for “all your cash are belong to us” but the street-wise Italians won’t be easily fooled..
Market Overview
Stocks rose for a fourth day, U.S. equity-index futures rallied and the dollar fell on signs the world’s largest economy is recovering and as takeovers increased. Commodities climbed as oil headed for the biggest weekly gain in almost two months.
The MSCI All Country World Index advanced 0.4 percent at 8:45 a.m. in London, set for the longest winning streak since Dec. 5. Standard & Poor’s 500 Index futures increased 0.5 percent and Treasury 10-year yields climbed one basis point. The Dollar Index slid 0.2 percent, while South Korea’s won strengthened 0.5 percent. Oil was up a fifth day in New York and copper added 0.9 percent in London.
The Stoxx Europe 600 Index rose 0.7 percent, taking its weekly advance to 3.3 percent. The MSCI Asia Pacific excluding Japan index added 1.4 percent. Australia’s S&P/ASX 200 Index rose 1.2 percent as Gloucester Coal surged 22 percent after China’s Yanzhou Coal agreed to buy the Sydney-based company for A$2.1 billion ($2.13 billion) in cash and shares. Yanzhou Coal jumped 6.6 percent in Hong Kong.
The dollar headed for weekly declines against 14 of its 16 major peers. The currency fell to 78.04 yen and weakened 0.2 percent to $1.3078 against the euro.
Oil futures in New York rose as much as 0.7 percent to $100.23 a barrel. Futures have jumped 6.7 percent this week, set for the largest increase since the five days ended Oct. 28. Copper in London gained 0.9 percent to $7,611 a metric ton, climbing for a fourth day, the longest increase since October. The metal is poised for a 3.5 percent rise this week, the first increase in three weeks.
Market snapshot at 9:45 am GMT (UK time)
The Asian Pacific markets ‘enjoyed’ mixed fortunes in overnight/early morning trade; the Nikkei fell by 0.77%, the Hang Seng closed up 1.37% and the CSI closed up 0.76%. The ASX 200 closed up 1.21%. European markets have been steady in the morning session; the STOXX 50 is up 0.63%, the UK FTSE is up 0.42%, the CAC is up 0.74%, the DAX is up 0.28% the Portuguese index the PSI is up 1.52% but down 31.52% year on year.
Economic calendar releases that may affect sentiment in the afternoon session
13:30 US – Durable Goods Orders November
13:30 US – Personal Income November
13:30 US – Personal Spending November
15:00 US – New Home Sales November
Analysts surveyed by Bloomberg gave a median forecast of +2.20% for durable goods orders, compared with the last release which was revised to -0.50%. Excluding transportation, the expectation is for +0.40%, down from a revised +1.10%. Personal spending is predicted ar +0.30% compared with a previous figure of +0.10%. A poll of economists showed a median prediction of 315,000 new home sales, compared with 307,000 last month.
Source: FX Central Clearing Ltd, (FXCC BLOG)
http://blog.fxcc.com/all-your-cash-are-belong-to-us-mario-monti-takes-on-the-italian-cash-society/
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