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How hard is it to pump $41 billion?
Thursday, November 01, 2007
The Associated Press reports that the Federal Reserve money pump was called to action earlier today to deliver a whopping $41 billion into the U.S. financial system. How can banks in Dubai and Hong Kong possibly keep up?
The Federal Reserve Bank of New York, which carries out the central bank's open market operations, moved Thursday to inject $41 billion in temporary reserves into the U.S financial system. It came as part of ongoing efforts designed to ensure that the markets — which have suffered through a period of turbulence over the last few months — function smoothly. The cash infusion came in three separate operations.
Maybe they should start pumping the money directly into the stock market.
A New York Fed spokesman said it was the largest single day of operations since $50.35 billion was pumped into the system on Sept. 19, 2001, following the terror strikes on New York and Washington. He declined further comment.
...
Since August, the Fed has been pumping cash into the financial system to help ease strains from the credit crunch. It also has cut its lending rate to banks — a third such cut came on Wednesday. The Fed also has ordered two reductions to its most important interest rate, the funds rate, to help the situation.
7 comments:
"Maybe they should start pumping the money directly into the stock market."
That's what they've been doing, albeit indirectly. They're doing all they can to keep it propped up.
they actually had 42.5 billion maturing so they actually reduced reserves. Rather amazing!
Great web site for this info is:
http://www.gmtfo.com/RepoReader/OMOps.aspx
You are assuming they already don't do that.
But just as much as the $41 bil, the scary part is FHLB! They have $1.15 Trillion of debt outstanding. They are lending our tax dollars to Countrywide and company.
http://housingdepression.blogspot.com/2007/11/your-tax-money-at-work.html
Time to really bring out those choppers - just drop it into our laps. Far easier.
We just took out an equity loan - at 3.9%...
From the WSJ Economics blog:
Technical Forces Behind Fed’s Big Interventions
Large-sized Federal Reserve liquidity injections over recent weeks have raised concern among market participants that troubles still abound in financial markets, but it’s increasingly clear that technical considerations are driving the operations.
Since market troubles flared in August, hefty interventions have been the order of the day. Indeed, the Fed pumped some $41 billion in temporary liquidity into the financial system on Thursday, larger than the $38 billion the Fed pumped in immediately in the heat of August’s financial troubles, and rival the interventions taken in the wake of the Sept. 11 attacks.
Observers have largely subscribed to a technical explanation for the Fed’s activities. To be sure, unsettled markets do form the backdrop for the size of the operations. But a number of signals suggest no August-like events are driving the Fed now. For one, the fed funds rate has been trading near its target without any massive deviations — late Thursday, it was quoted at 4.5625%. That suggests pressures in the fed funds market are roughly where they should be.
Meanwhile, while the absolute size of Fed actions aren’t necessarily the thing market participants should focus on, the Fed does have a larger temporary need to add reserves. That’s because in August, in a bid to give itself flexibility in its temporary operations, the New York Fed redeemed some $10 billion in Treasury securities from its permanent portfolio. Those holdings exist to adjust overall liquidity in line with the long term growth of the economy.
The Fed now has to make up that contraction in the permanent holdings with temporary operations, and that pushes up the size of the temporary operations that get done on a regular basis. The Fed also has additional complications related to changing and unpredictable borrowing at the discount window. That emergency lending tool has been heavily touted by the central bank as a source of short term funding, and its usage has been volatile.
Moreover, as the year-end holiday season approaches, the Fed faces increased demand for liquidity as cash needs rise. That demand for additional liquidity ends, however, when the holidays are over. –Michael S. Derby
Look, what anon at 1:01 says is TRUE. That of touted $41B number for today neatly matches their Fed Temporary operations described at:
http://www.newyorkfed.org/markets/omo/dmm/temp.cfm
In that case you have to consider that there were $42.5B expiring/maturing repos today. Its just that plain isn't it ?
Where else is this $41B number coming from ? Its not from the permanent operations - there haven't been any since early May( same website).
Is the Derby blog entry an answer to anon at 1:09's comments ? I don't see how ? You can look at average sloshes at the website anon quoted ( no,its not me and its not my website ) and they NET increased by $10B over Aug, $10B over Sep, but nothing over Oct for a total addition of slosh of $20B. I wouldn't dispute THAT figure but the $41B addition just doesn't stack. Unless of course you can demonstrate different...
-K
And exactly why are we all worked up over the $15-$25 Million that North Korea counterfeits per year? Maybe the Fed has an alternative opportunity to offer them, instead of selling nukes.
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