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UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report
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Anonymous Coward
User ID: 380853
8/27/2008 6:20 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Saving & Loan crisis, now what does that remind me off......it has five in it.....yep.... and somethang to do with this election...or someone in it.........right.....help me out here.....
 The great republican ronnie regan,saving and loan scandal,180 billion cost to the tax payers.McCain was caught in the middle ,one of the Charles Keating "5".Keating gave john 120,000 and cindy 420,000 US American dollars.These are Great Americans,they love America,Money for nothing ,chicks for free,,,,,,,,,
Sorry,
I was stoned and I missed it the first go round but you mean to tell me that this isn't the first time this bullshit has happened because of the same reasons? We Americans are a bunch of dumbass m-fuckers!
[link to en.wikipedia.org]
In an effort to take advantage of the real estate boom (outstanding US mortgage loans: 1976 $700 billion; 1980 $1.2 trillion)[citation needed]and high interest rates of the late 1970s and early 1980s, many S&Ls lent far more money than was prudent, and to risky ventures which many S&Ls were not qualified to assess. L. William Seidman, former chairman of both the FDIC and the Resolution Trust Corporation, stated, "The banking problems of the '80s and '90s came primarily, but not exclusively, from unsound real estate lending." [4] |
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lamchop
User ID: 423573
8/27/2008 6:45 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
491003 - my, my, |
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Anonymous Coward
User ID: 472293
8/27/2008 7:47 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
GAME OVER !!
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Concerned Reader
User ID: 8526
8/27/2008 8:12 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Small bank failures happen all the time, so do nail-salons, bookstores and other small businesses.
A panic can never help a situation like this, if you took all your cash out and the economy failed you would have alot of green toilet-paper to use. |
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Anonymous Coward
User ID: 489489
8/27/2008 8:54 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
WOOHOO!!!! let the GAmes begin!!! its time for this whole crap to crash and burn so we can build our utopia!!! change is comin...are u ready? |
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Skipper1975
User ID: 448826
8/27/2008 9:13 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
WOOHOO!!!! let the GAmes begin!!! its time for this whole crap to crash and burn so we can build our utopia!!! change is comin...are u ready?
get everyone to pull out their money from banks and stop using credit cards
for the win!
"Blue Solar Storm"
[link to www.myspace.com] |
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Anonymous Coward
User ID: 492316
8/27/2008 9:23 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Small bank failures happen all the time, so do nail-salons, bookstores and other small businesses.
A panic can never help a situation like this, if you took all your cash out and the economy failed you would have alot of green toilet-paper to use. Quoting: Concerned Reader 8526
That's a fact, but these are not small banks and mortgage institution going under most will be big names. Leave it in or take it out all the same it will still be useless toilet paper by the time this is all over. |
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Anonymous Coward
User ID: 375101
8/27/2008 9:50 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
OMEGA RIGHT AGAIN! |
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dayold
User ID: 492023
8/27/2008 10:06 PM
 | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
FDIC may borrow money from Treasury: report
[ link to www.reuters.com]
Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.
The borrowed money would be repaid once the assets of that failed bank are sold.
"I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses," Chairman Sheila Bair said in an interview with the paper.
Bair said such a scenario was unlikely in the "near term." With a rise in the number of troubled banks, the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks has been drained.
In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.
The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.
The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
The fact that the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis, the Journal said. Quoting: markusmaximus
Moron  |
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dayold
User ID: 492023
8/27/2008 10:06 PM
| | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
FDIC may borrow money from Treasury: report
[ link to www.reuters.com]
Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.
The borrowed money would be repaid once the assets of that failed bank are sold.
"I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses," Chairman Sheila Bair said in an interview with the paper.
Bair said such a scenario was unlikely in the "near term." With a rise in the number of troubled banks, the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks has been drained.
In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.
The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.
The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
The fact that the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis, the Journal said. Quoting: markusmaximus
Moron |
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Anonymous Coward
User ID: 470675
8/27/2008 10:17 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Yeah, I didn't think they had enough in reserves to offset the initial losses. I'm sure the banks do have some decent assets to pay back the Treasury when they eventually liquidate. |
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Anonymous Coward
User ID: 492316
8/27/2008 10:22 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
FDIC may borrow money from Treasury: report
[ link to www.reuters.com]
Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.
The borrowed money would be repaid once the assets of that failed bank are sold.
"I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses," Chairman Sheila Bair said in an interview with the paper.
Bair said such a scenario was unlikely in the "near term." With a rise in the number of troubled banks, the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks has been drained.
In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.
The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.
The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
The fact that the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis, the Journal said.
Moron Quoting: dayold
What is exactly so moronic about that, please enlighten us oh wise one. Where is this money from the treasury coming from, the tax payer um no we got a war to fight, the indirect inflation tax well kind of. We will get anouther note from china and print more mony and increas inflation you better tell your kids you are sorry now. Someones going to have the pay the trillions back to china. |
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idiot
User ID: 492379
8/27/2008 11:09 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Good ole fashioned bank run. Quoting: Anonymous Coward 5465
and I'm a day late and a dollar short...
in a few hours at least...
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markusmaximus 
Yes, I scare my pets.
User ID: 492385
8/27/2008 11:30 PM
 | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Moron
I see your comments here and there...
Free advice: Learn to contribute. Learn to keep up. Try me again when you think you've figured those things out.
Don't Panic.
P=fl²
P - Peace; f - Freedom; l - Love
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Anonymous Coward
User ID: 479417
8/28/2008 12:58 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
OMEGA usaully is spot-on with his posts.
My guess: Lehman Or ones that have not been mentioned.
Citi BOA |
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<October>
User ID: 427959
8/28/2008 2:28 AM
 | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
FDIC may borrow money from Treasury: report
[ link to www.reuters.com]
Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.
The borrowed money would be repaid once the assets of that failed bank are sold.
"I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses," Chairman Sheila Bair said in an interview with the paper.
Bair said such a scenario was unlikely in the "near term." With a rise in the number of troubled banks, the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks has been drained.
In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.
The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.
The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
The fact that the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis, the Journal said. Quoting: markusmaximus
I was just on my way out when I caught this...so I haven't read the whole thread.
BUT..."The borrowed money would be repaid once the assets of that failed bank are sold."
How can the assets of a failed bank repay ANYTHING??
Those "assets" are at best not worth very much. At worst, those assets are completely fictional!
I guess the American taxpayer is the fall guy once again. 
Take care, folks!
~~~~~~~~~~~~~
KNOWING is power.
~~~~~~~~~~~~~
First you feel it;
THEN you heal it...
~~~~~~~~~~~~~ |
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Anonymous Coward
User ID: 393403
8/28/2008 2:34 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
There is no shortage of cash. All they do is print more. It's not like it was based on gold, or anything of value. The only limit is the paper supply or computer memory. Quoting: Anonymous Coward 490243
gotta give it to this crew of crooks... they sure knew what they were doing when they stopped publishing the M3 data... |
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hatch battener
User ID: 492456
8/28/2008 2:41 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Saving & Loan crisis, now what does that remind me off......it has five in it.....yep.... and somethang to do with this election...or someone in it.........right.....help me out here..... Quoting: Enlilson
It does remind of those days 20 years ago, and for those who weren't around, what was most shocking about it to me, was the sordid cesspool of crime and corruption that a big part of the financial industry had descended into.
A couple things bookmark that era. In 1982, when Ronald Reagan signed the bill that deregulated the Savings and Loans, at the bill signing, I just looked up the quote, President Reagan said "all in all, I think we just hit the jackpot."
And they did hit the jackpot, the taxpayers had to bail out the depositors for $160 billion that was looted by these crooks. The deregulation left so little oversight that even convicted felons were opening S&L's. Organized crime saw the oportunity to make alot of money, and they did. Through the interconnectedness with corrupt banks like BCCI, the financial industry was exposed as being embroiled in international money laundering, drugs and arms trafficking. Congress tried to get to the bottom of it, but the scandal was so huge and byzantine, with money freely flowing between corrupt businessmen, outright criminals and politicians, nobody could really figure out what was going on.
And then to put the other bookmark on the era, federal regulators closed the corrupt Silverado Savings and Loan on November 5th, 1992. The day after George Bush Sr. lost the 1992 election for President. George Bush's brother Neil was on the the board of directors of Silverado. It was later revealed that the White House had ordered that Silverado be kept open, going against federal regulators who wanted it closed earlier in the year, in the midst of the Presidential campaign. It is estimated that he collapse of Silverado eventually cost the taxpayers $1 billion.
What makes me wonder about this current banking crisis, is if behind the scenes, things have sunk to level of the cesspool of crime and corruption that we had during the S&L scandal.
You know, bankers around today look pretty respectable. With their nice suits and everything. Fine, upstanding citizens they must be, right? Well, that's how the owners of the S&L's looked like back in the '80's, before we found out they were outright crooks, who looted the banks into the hundreds of billions of dollars. |
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Anonymous Coward
User ID: 484854
8/28/2008 4:49 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Here's what gets me about the FDIC...
As I remember, a recent bank failed and the FDIC gave depositors only 50 cents on every dollar past the insured $100,000.
And as this article says, they will liquidate the bank holdings.
So what happens if, after they go through their liquidation process, they have more left over than they initially thought they would? Will they go back and bump up the $0.50/dollar to something more? |
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Anonymous Coward
User ID: 484854
8/28/2008 4:54 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
gotta give it to this crew of crooks... they sure knew what they were doing when they stopped publishing the M3 data... Quoting: Anonymous Coward 393403
My thoughts exactly. Their reasons for doing so at the time were unbelievable -- that it was simply too costly for them to come up with those numbers. Now we see the true reason -- they were about to trigger a bust cycle. |
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Anonymous Coward
User ID: 486875
8/28/2008 6:51 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Here is a really good and easy to understand article regarding all this:
[ link to www.newsvine.com]
Pretty much confirming more banks to go down.
from the article I've linked:
"The FDIC said 117 banks and thrifts were considered to be in trouble in the second quarter, up from 90 in the prior quarter and the biggest tally since mid-2003. (The agency doesn't disclose the names of institutions on its internal list of troubled banks; doing so would like spark a run on deposits. On average, 13 percent of banks that make the list fail.)"
..."doing so would like spark a run on deposits."
LIKE, FOR SURE, DUDE!
There is no shortage of cash. All they do is print more. It's not like it was based on gold, or anything of value. The only limit is the paper supply or computer memory.
 |
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Anonymous Coward
User ID: 492249
8/28/2008 8:47 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
THE TREASURY HAS MONEY ? |
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Anonymous Coward
User ID: 453949
8/28/2008 9:02 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
When First Priority bank here in sw fl went under a couple of weeks ago, they told customers that the money from the sale of bank assets would go towards the uninsured funds ($$ over 100k). So if that money is used instead to pay back the fed does that mean the customers are SOOL? |
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Linzartart
User ID: 476887
8/28/2008 10:27 AM
 | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
what money? the US is bankrupt. oh thats right they'll just place a call down to their printing press, aka the fed
Afterism; A concise clever statement you dont think of until its to late. |
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Anonymous Coward
User ID: 276543
8/28/2008 11:24 AM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Notice on CNBC everytime they talk about the economy they show this clip os presses rolling out sheets and sheets of cash. That clip is on bout 10 time a day !! |
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markusmaximus
Yes, I scare my pets.
User ID: 148742
8/28/2008 12:42 PM
| | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Notice on CNBC everytime they talk about the economy they show this clip os presses rolling out sheets and sheets of cash. That clip is on bout 10 time a day !! Quoting: Anonymous Coward 276543
That's what they're going to do to fund the FDIC.
Just print more. And we wonder why inflation is taking hold...
Don't Panic.
P=fl²
P - Peace; f - Freedom; l - Love
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Anonymous Coward
User ID: 276543
8/28/2008 1:22 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
CNNMoney.com
What the FDIC problem list isn't telling us
Thursday August 28, 1:01 pm ET
By David Ellis, CNNMoney.com staff writer
The government's latest assessment of the nation's financial system showed that many more small banks are in trouble. But what the report didn't say may speak volumes.
On Tuesday, the Federal Deposit Insurance Corp. revealed that the number of institutions on its so-called "problem bank" list jumped to 117 during the second quarter, up from 90 just three months earlier.
ADVERTISEMENT
That list has gained greater attention lately as many banks continue to suffer losses stemming from the deteriorating housing market and slowdown in the broader economy. Nine banks have failed so far this year, including IndyMac, a California-based mortgage lender with assets of $32 billion at the time of its collapse.
But experts contend that the list is a lagging indicator and, as a result, may not provide an accurate picture of the current health of U.S. banking industry.
Typically, the list is published some 8 weeks after all of the nation's banks have reported their latest quarterly results.
What's more, notes Mark J. Flannery, a professor of finance at the University of Florida's Warrington College of Business Administration, regulators base their decision on what banks tell them.
And since current accounting standards give banks some discretion about when they recognize bad news, they may want to put it off as long as possible.
Exactly how bank regulators determine which institution is worthy for the "problem list" remains a process shrouded in secrecy.
But what is known is that the health of a bank tends to be based on several factors including the amount of capital an institution has on hand to protect against losses, the quality of its assets, its management, and its earnings, liquidity and sensitivity to market risk.
Bank regulators - which in addition to the FDIC include the Office of the Comptroller of the Currency (OCC) and Office of Thrift Supervision (OTS) - then give the banks a report card, assigning a composite rating based on the bank's performance in each category. Those that receive a rating of 4 or 5 are put on the list.
A selective list?
Since the failure of IndyMac in mid-July, however, speculation has emerged that regulators may have exercised some discretion about which institutions they put on the confidential list.
The FDIC's first-quarter problem list, released at the end of May, clearly did not have IndyMac on it. That's because the FDIC reported that the 90 banks on the list had a combined $26.3 billion in assets - less than the size of IndyMac. That suggested that the only problem banks at the time were smaller community banks.
Experts say that if IndyMac had been on the list, the total asset size of troubled banks would have been much higher. That might have prompted a witch hunt of sorts, with the market looking for which bank was in trouble and possibly causing a run on that institution.
"It is kind of the issue of the snake swallowing the watermelon," said Bert Ely, an Alexandria, Va.-based banking industry consultant of Ely & Co. "I can assure you if IndyMac had been on the list in late May, there would have been an immediate hunt."
Others pointed out that bank failures, as a rule, don't happen to be overnight phenomena.
Tim Yeager, a professor of finance at the University of Arkansas' Walton College of Business who previously worked for the Federal Reserve Bank of St. Louis, said regulators probably knew about the state of IndyMac for some time even though it wasn't on the first-quarter problem list.
"It is telling that IndyMac was not on the problem list the quarter before," said Yeager. "Usually bank failures like that are pretty slow events - it is unlikely [federal regulators] were surprised by that."
The OTS, IndyMac's primary regulator, has maintained that it was aware of the company's problems, but was in the midst of an examination of the lender that did not wrap up until after the first quarter was over. At that point, IndyMac was placed on the list.
If it ain't broke....
Those who keep a close eye on the nation's banking industry argue that the nearly 30-year-old bank monitoring system, commonly referred to as CAMELS (which stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk) remains quite effective at gauging a bank's health.
In recent years, there have been calls for regulators to take into greater account the wisdom of the market, most notably a bank's stock price or the yield a company's debt is trading at.
As innovative a solution that may be, the lion's share of the nation's banks are not publicly traded. What's more, those indicators aren't always reliable, note experts such as Flannery.
Stock prices, for example, can be affected by broader gyrations in the market and may not accurately predict if a bank will go bust or is even on the verge of failure.
"I think there are times when the CAMELS system is more informative and times when the market price is more informative," said Flannery. "There is no general rule."
If regulators are at a disadvantage, it is determining just how many banks could fail as a result of the current credit crisis.
While regulators are working hard to stay ahead of the problems faced by banks, their forecasting models have not endured a credit or mortgage crisis of this magnitude before and, as a result, have no way of telling how deep the impact will be.
"You can look at this and say they are missing the problems, but this business cycle is different from others," said Yeager. "You need to go through this to be able to update the model - it is really a Catch-22." |
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Eagle # 1
User ID: 216802
8/28/2008 5:13 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
WRONG title, OP !
Should READ ... FDIC brorows peices of worthless paper from Treasury; Taxpayers STUCK with the BILL, FOREVER !
Piace. Just MHO !
Eagle |
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Anonymous Coward
User ID: 283256
8/28/2008 5:22 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
Great! Another 'bailout' that will put the burden of incompetent bankers on the backs of the taxpayers, only this will end up costing hundreds of billions IN ADDITION to the socalled 'housing bailout' which will cost further hundreds of billions. The ultimate in corporate welfare when added to the cost of the fake 'terror wars' for corporate oil to 'control' the middle east DWARFS all entitlement programs for years! And when you add the PPT blatantly propping up the markets and suppressing the price of metals just to make the criminal leaders look good going into elections it is time to take action on Bush Sr's famous quote "If the American people ever figure out what we have done they would chase us down the street and lynch us". Since every whore in DC is also complicit NOTHING will change until the bulk of Americans lose their 401K/pension funds when the undeniable collapse comes. Aren't you glad you didn't let these theives also put Social Security into the funds they are looting/losing? |
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Anonymous Coward
User ID: 276543
8/28/2008 6:48 PM | | Re: UH OH: FDIC may borrow money from Treasury to see it through an expected wave of bank failures: report | Quote |
AP
Banks borrow more from Fed; Wall Street takes pass
Thursday August 28, 4:31 pm ET
By Jeannine Aversa, AP Economics Writer
Fed: Banks borrow more from emergency lending program; investment firms take pass
WASHINGTON (AP) -- Banks borrowed more over the past week from the Federal Reserve's emergency lending program, while Wall Street firms passed for the fourth straight week.
A Fed report released Thursday said commercial banks averaged $18.47 billion in daily borrowing over the past week. That compared with a daily average of $17.51 billion in the previous week.
ADVERTISEMENT
For the week ending Aug. 27, Wall Street firms didn't take out any loans, the fourth straight period of no action. Their borrowing, however, averaged as high as $38.1 billion a day over the course of a week in early April.
Investment houses in March were given similar loan privileges as commercial banks after a run on Bear Stearns pushed what was the nation's fifth-largest investment bank to the brink of bankruptcy. The situation raised fears that other Wall Street firms might be in jeopardy.
Bear Stearns was eventually taken over by JPMorgan Chase & Co. in a deal that involved the Fed's financial backing.
The identities of commercial banks and investment houses that borrow are not released. Commercial banks and investment companies now pay 2.25 percent in interest for the loans.
In the broadest use of the central bank's lending power since the 1930s, the Fed in March scrambled to avert a market meltdown by giving investment houses a place to go for emergency overnight loans. The Fed has since extended those loan privileges into next year. Originally they were supposed to last through mid-September.
More recently, the Fed has said troubled mortgage giants Fannie Mae and Freddie Mac could draw emergency loans from the central bank if they needed. There was no indication in the weekly report that they had done so.
Separately, as part of efforts to relieve credit strains, the Fed auctioned nearly $26.65 billion in Treasury securities to investment companies Thursday. The Fed was making $50 billion worth of the securities available.
In exchange for the 28-day loans of Treasury securities, bidding companies can put up as collateral more risky investments. These include certain mortgage-backed securities and bonds secured by federally guaranteed student loans.
The auction program, which began March 27, is intended to make investment companies more inclined to lend to each other. A second goal is providing relief to the distressed market for mortgage-linked securities and for student loans.
Federal Reserve: [link to www.federalreserve.gov] |
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