[roccman]

$this->bbcode_second_pass_quote('', 'O')k guys and gals, listen up. I just finished looking at the Fed's weekly H.3 report, which you can find here:
http://www.federalreserve.gov/releases/h3/Current/

Normally, this is a pretty boring report, but not this time. Scroll down to Table 2 and look at the last entry, for August 29. What do we find? This:

Date total(2) nonborrowed required
29p 43313 41754 42253

Look at that line real hard. Does anything strike you as unusual? Give up? What you are looking at is that nonborrowed reserves are LOWER than required reserves!. Notice the difference: $499 Million. If you scroll down to Table 3, which is the same data but adjusted for changes in reserve requirements, you will see the difference is EXACTLY $500 million dollars.

Hmm...where have we seen that $500 million figure before? Oh yeah, four banks borrowed $500 million each. The story we were told was that they wanted to 'remove the stigma of borrowing at the discount window' so others wouldn't feel so bad if they had to do it.

I call BULLSHIT on that story. Here is the way I see it. Somebody was in serious SHIT here, possibly one of these four, perhaps it was CFC, the ultimate destination of the funds (as per rumors). So, they had to go to the discount window. But what if the market sniffs out who it was and it gets plastered all over CNBC? Instant panic! The stock market would have sold off immediately. So, they hatched a plan. What if more than one bank gets a loan at the window, and you make this all public? You effectively hide the troubled institution, and no suspicions arise from keeping it all quiet. You even sell the story that it's a GOOD thing to borrow from the discount window.

I also wondered how often this happens so I downloaded the data from the St. Louis Fed website and ran a query. This showed the last time this happened was July 1988. It used to happen a lot before that time, presumably because the discount rate was lower than the Fed funds rate and banks just borrowed there instead. We also had the S&L debacle. So this is very unusual, especially now with the discount rate much higher than the Fed Funds Rate. Now, the only reason to use the discount window is if no bank will loan to you in the overnight market. Sure, the Fed can do repos, but what if you don't have the right collateral? The discount window accepts a greater variety of collateral, including CMOs, and boat loans.

Maybe I'm reading too much into this. Perhaps. What bothers me most is that the four banks claimed they didn't need the loans. That's bullshit, someone did need them because they were running low on reserves! Their claim that they could have gotten loans elsewhere is also bullshit. When the banking system does not have enough reserves to satisfy requirements, they can't loan out any money, and the CP market was essentially shut down!

So, what do you guys think? Am I losing it? Or is this some serious shit?

[firestarter]

Good find, Roc.

Those at the link you provided are speculating that the bank might be Citi Bank, and that it is insolvent!

If Mr Bill, Dantes Peak, mmasters or any others are logged on, I'd really be interested in their take on this.

If true, what a bombshell.

[setag]

I think the banks are borrowing money at the lower discount and are now busy buying companies and assets.

[dukey]

$this->bbcode_second_pass_quote('', 'T')he Bank of England has warned financial institutions authorised to use its emergency lending facility that they are not supposed to discuss it publicly.

The warning came after it announced on Thursday that the facility had been tapped for a second time since turmoil gripped global money and credit markets.

[Offshore]

Doesn't make me feel safe to have my checking account at Citi...lol.

Thank God for Chinese Pandas and Krugerrands.

[Twilight]

Been reading that. It's like a game where hidden pieces are revealed. Something comes to light, and its meaning may not be clear for a while, it may not be relevant for a while, but something else will slot into place later.

[jboogy]

But isn't 2 billion chicken feed to the big banks? I mean how much wiggle room does 500 mill. give a huge bank like citigroup , I'm guessing the big banks do billions worth of business every day. We're paying 2 billion a day just to service our overseas debt .

[Twilight]

It might have been exactly what they needed. No-one is going to borrow excess money from a lender of last resort. Or it might not have been destined for them. They could have been acting on another, smaller bank's behalf. The market is putting together a jigsaw puzzle at the moment, and most pieces are still blank. No-one can honestly say they know what this means - yet.

[roccman]

$this->bbcode_second_pass_quote('setag', 'I') think the banks are borrowing money at the lower discount and are now busy buying companies and assets.

[setag]

Crossroads seem to come and go. The Gypsy flies from coast to coast.

No question about it, somebody BIG got caught with their pants down. If a bank becomes insolvent across the ocean there is nothing the SEC can do! The banks and the fed did the only thing they could do....resuscitate.

Will it be enough, who knows? I think some time in October we will
see the economic sunshine or one hell of a storm is coming.

[roccman]

$this->bbcode_second_pass_quote('ferrelgiraffe', 'I') Roccman.

Roccman is smart.

[Plantagenet]

The BBC is reporting as "breaking news" that a German bank has just announced a billion dollar loss in the subprime market.

The financial whizzes at the big companies in New York, Germany and elsewhere who decided to put their investment dollars into buying bundles of subprime loans were a pretty stupid bunch.

[roccman]

$this->bbcode_second_pass_quote('', 'T')he meltdown at IKB took place just eight days after a statement from Stefan Ortseifen, the chief executive, that all was well and the bank was on target to make €280m. Within a week, IKB, one of the supposed stars of German banking and one of the best bond customers in the Euromarkets, found its commercial paper was unsaleable.

The German institutions were like sitting ducks waiting to be picked off by sharpshooter Euromarket sales staff.

The reality is almost certainly the customers were not nearly as sophisticated as the investment banks, which, quite understandably, looked after their own interests first. Therefore, when Morgan Stanley and Deutsche Bank were astutely and profitably shorting the sub-prime market by selling the ABX Index, most big investment banks were creating CDOs and other credit products that effectively allowed them to dump sub-prime risk.

[Ferretlover]

$this->bbcode_second_pass_quote('', '[')b]Credit Suisse Profit Tumbles on Writedowns
Credit Suisse reported a 31 percent fall in group net profits to 1.302 billion Swiss francs ($1.12 billion), with profit at its investment banking unit all but wiped out by mortgage-linked writedowns.
Investment banking income was hit by writedowns of over 2.2 billion Swiss francs ($1.9 billion) in leveraged loan commitments, residential mortgages and collateralised debt obligations. The division barely broke even, making a net profit of 6 million francs. …
"It is too early to predict when all of the affected markets will return to normal levels," he added. …

[greenworm]

I did mention earlier that when you jumble mr. helicopter's letters, you do indeed get break bank.