Financial Crisis

[badge]

Theres only 4m Irish; just this loan is an extra $17,000 for every single person.

Investment the Irish way

[sokal]

LOL...........This is great !

Watch from the 40 second mark till 3:40.

Rick Santelli I always like watching him because he is a straight talker.

He usually reports the treasury bond sales.

I dont know how long he will have a job at CNBC if he keeps it up.

But listen he says what so many think..........

Embedding of this video is not allowed so you need to watch it on U tube

http://www.youtube.com/watch?v=I8ANCD-Ykk4

Better hurry I doubt CNBC allows it to stay up for long

FOX business will hire him. Santelli is the only one who knows his <deleted> on CNBS.

Karl Denninger is on a roll, he is a mathimatical kind of guy and he is the most bearish person around at the moment.

[midas]

This is exactly how I feel about this lying SOB Bernanke

When I see the video of him answering " no " after the Senate committee asks

him if they will be monetising the debt, how much more of a blatant

lie can there possibly be ? From now on kids can just get away with lying to their

parents by saying they are doing no worse than the Chairman of the Fed

‘We still have the same disease'

Ben Bernanke saved nothing! He shouldn't be allowed in Washington. He's like a doctor who misses the metastatic tumour and says the patient is doing very well. The first thing I would tell Chinese officials is, how can you buy U.S. bonds as long as Larry Summers is there? He's a textbook case of overconfidence. Look what happened to Harvard's finances. They took a lot of risk they didn't understand, and it was a disaster. That's the Larry Summers mentality.

http://www.theglobeandmail.com/report-on-b...article1286246/

[Abrak]

I am fed up with statements such as the "banks are cutting lending". Surely there are several factors in play here,

- the peeps do not want to borrow.

- the banks cannot lend because their balance sheets are full of "assets" which cannot be sold at the fictitious price they have been given.

- the banks don't want to lend because they can see which way the economy is heading.

I am not sure about this - just guessing really. But presumably another big factor must be that the banks are lending to the Government by buying USTs. Afterall there are US$2trn of issuance this year, China/Japan etc might take a absolute maximum US$400bn, the Fed US$300bn that leaves US$1.3trn. So with a steep yield curve, a bank has deposits at near 0% and buys 10 year USTs yielding 3.7% or so. I dont know US bank capital adequacy rules but USTs may not even be risk weighted. Private sector lending isnt going to shrink as much as US$1.3trn this year.

[lannarebirth]

I am fed up with statements such as the "banks are cutting lending". Surely there are several factors in play here,

- the peeps do not want to borrow.

- the banks cannot lend because their balance sheets are full of "assets" which cannot be sold at the fictitious price they have been given.

- the banks don't want to lend because they can see which way the economy is heading.

I am not sure about this - just guessing really. But presumably another big factor must be that the banks are lending to the Government by buying USTs. Afterall there are US$2trn of issuance this year, China/Japan etc might take a absolute maximum US$400bn, the Fed US$300bn that leaves US$1.3trn. So with a steep yield curve, a bank has deposits at near 0% and buys 10 year USTs yielding 3.7% or so. I dont know US bank capital adequacy rules but USTs may not even be risk weighted. Private sector lending isnt going to shrink as much as US$1.3trn this year.

I've been thinking about this for a year or two. How does the Treasury move all that paper and how do banks get decent quality reserves. Banks buying UST's would seem to be the answer. It wouldn't surprise me to learn that it may soon be mandated.

[midas]

In Australia Bank Managers used to be respected.....they could even witness

documents such as Statutory Declarations.......but at this rate

they will be lower down the career scale than estate agents and used car salesmen

Barclays accused of trickery in $12.3bn toxic asset sale

The sale will allow the bank to "derecognise the assets", shielding it from any further fall in their "mark-to-market" value. Instead, Barclays will use a different accounting treatment to take "a longer term view" that will provide "a boost to its capital strength by punting the issue into the long grass", Ian Gordon, banks analyst at Exane BNP Paribas, said.

http://www.telegraph.co.uk/finance/newsbys...asset-sale.html

[Naam]

Barclays will use a different accounting treatment to take "a longer term view" that will provide "a boost to its capital strength by punting the issue into the long grass", Ian Gordon, banks analyst at Exane BNP Paribas, said.

= creative accounting

[jcon]

But presumably another big factor must be that the banks are lending to the Government by buying USTs. Afterall there are US$2trn of issuance this year, China/Japan etc might take a absolute maximum US$400bn, the Fed US$300bn that leaves US$1.3trn. So with a steep yield curve, a bank has deposits at near 0% and buys 10 year USTs yielding 3.7% or so. I dont know US bank capital adequacy rules but USTs may not even be risk weighted. Private sector lending isnt going to shrink as much as US$1.3trn this year.

I've been thinking about this for a year or two. How does the Treasury move all that paper and how do banks get decent quality reserves. Banks buying UST's would seem to be the answer. It wouldn't surprise me to learn that it may soon be mandated.

lanna I'm afraid it already is, effectively....

And as for that Santelli clip, I always liked the guy. I don't really watch CNBC anymore, but when I did, I always liked Santelli - he seemed like a straight-shooter, and the traders on the floor like him - he's not just some reporter with whom the traders bear. And he's pretty darn smart IMO.

And I've suspected for a long long time that Joe Kernan really does not give a shit and is taking the piss for most of his show, and he knows it's all a sham, he just lays on the sarcasm just below the radar enough so his idiot producers don't get it.... So I like him too... Maybe at one point some 10 years + ago he cared (remember when he was at the 'stock desk' or whatever that was haha), but clearly not now - I think it's just a paycheck to him as it would be to me were I in his position. The rest of em... meh.

[lannarebirth]

But presumably another big factor must be that the banks are lending to the Government by buying USTs. Afterall there are US$2trn of issuance this year, China/Japan etc might take a absolute maximum US$400bn, the Fed US$300bn that leaves US$1.3trn. So with a steep yield curve, a bank has deposits at near 0% and buys 10 year USTs yielding 3.7% or so. I dont know US bank capital adequacy rules but USTs may not even be risk weighted. Private sector lending isnt going to shrink as much as US$1.3trn this year.

I've been thinking about this for a year or two. How does the Treasury move all that paper and how do banks get decent quality reserves. Banks buying UST's would seem to be the answer. It wouldn't surprise me to learn that it may soon be mandated.

lanna I'm afraid it already is, effectively....

Interesting. I didn't know that. Well that solves lots of problems including perhaps the $USD problem. Move those creditors onshore.

Admittedly it's two drunks propping each other up, but it could be worse.

And as for that Santelli clip, I always liked the guy. I don't really watch CNBC anymore, but when I did, I always liked Santelli - he seemed like a straight-shooter, and the traders on the floor like him - he's not just some reporter with whom the traders bear. And he's pretty darn smart IMO.

And I've suspected for a long long time that Joe Kernan really does not give a shit and is taking the piss for most of his show, and he knows it's all a sham, he just lays on the sarcasm just below the radar enough so his idiot producers don't get it.... So I like him too... Maybe at one point some 10 years + ago he cared (remember when he was at the 'stock desk' or whatever that was haha), but clearly not now - I think it's just a paycheck to him as it would be to me were I in his position. The rest of em... meh.

I pullled the plug on my TV January1, 2000 so I don't see that stuff anymore. Always did like Santelli though and the others just look like frat boys.

[jcon]

lanna i used 'effectively' to indicate that it appears to be case, but of course as far as a real mandate like you mentioned, I am not sure or that, nor did I mean for anybody to understand it that way.

I do like the imagery of 2 drunks propping each other up... this thread has provided me with some great imagery - from Naam's Apocalyptic Riders (god I love that one, can we change "Riders" to "Ryders" just to make it more "hip?") to skittles-farting unicorns.... or was that another thread? But then again it's all the same isn't it, maybe 6-8 people talking to each other with random infusions of members here and there....

[Chunkton]

Next Leg Down More Painful than the Last

Interesting video, but found this reply to it below interesting. I wonder how long the shysters and banksters will be allowed to pillage the US before the population really does become angry about it. Always maintained the corruption in the west is just on a grander scale.

DougY - Wednesday September 16, 2009 08:31AM EDT

To Washington and Wall Street: You are obviously too deaf and too stupid to understand what happened in Washington on 9/12. You are so disconnected with the people in this country, that you labeled this huge event as racist, or right wing radicals. You are showing how incompetent and arrogant you are. YOU ARE TOO BIG TO SUCCEED. This isn’t about black and white, democrat and republican, it’s about THE PEOPLE. We are done with politics as usual in this country, and big businessmen pushing their money and agenda around Washington all for their profits. Things need to change in Washington, first off, STOP THE CORRUPTION! The time is now, time for you to wake up. Our jobs have all been shipped overseas, our retirement has been wiped out, our home values have plummeted, Fuel prices have doubled in 5 years, food prices have doubled in 5 years, utility rates are skyrocketing, bank fees are up, insurance rates are up, all while our paycheck has shrunk. The American people are under assault from corporations and the government corpocracy. You think you no longer need the American People, you now have the whole world to pillage thanks to free trade agreements. CEOs making 316 times the average wage, government bailing out big banks while people loose their jobs, homes, health insurance, retirement, and families. Big business getting everything they want from government while people suffer. You take your profits and distribute them amongst yourselves, instead of investing them into upgrading your equipment, and infrastructure, then raise fees to pay for necessary upgrades. You are fleecing the whole country. $2000 Fines for denying an energy audit, $3800 fines for not having health insurance. Censored free speech. Out of control government spending. Illegal aliens invading our borders. You are stripping us into a nation of poverty! Cram more expensive 1000 page legislation down our throats when the economy is still crashing. Bernanke, YOU LIE! Just read the headlines, we are slipping from number one rapidly because of the failed policies of both sides of the isle for the last 20 years. The American people will not stand for it, you’d better listen. Who’s going to pay for healthcare when the nation goes bankrupt? WASHINGTON, WALL STREET, LEAVE US ALONE! THE AMERICAN PEOPLE WILL FIGHT FOR OUR FREEDOM! WE HAVE FOUGHT FOR EVERYONE ELSES FREEDOM, WHAT MAKES YOU THINK WE WON’T FIGHT FOR OUR OWN! You are either with us or against us, don’t pick the wrong side. The American People

[Chaimai]

"

I am fed up with statements such as the "banks are cutting lending". Surely there are several factors in play here,

- the peeps do not want to borrow.

- the banks cannot lend because their balance sheets are full of "assets" which cannot be sold at the fictitious price they have been given.

- the banks don't want to lend because they can see which way the economy is heading.

12D - your original post obviously referenced the UK.

Let me explain what is happening with the banks - and I do know a little bit about banking.

Despite encouragement from the government (who own a good portion of their stock) the banks are mostly sitting with their thumbs stuck up their <deleted>. This not "because they can see which way the economy is heading" because they are all reporting that the bottom is behind us. Infact the bank economist that I respect most - Dennis Turner of HSBC, ex-TUC economist and someone who actually makes economics sound interesting - said ......"crystal ball gazing etc.... I can say with absolute certainty that this recession will end" he continued "I can't say precisely when but inmy view the low point was the end of Q1 2009".

The banks are in disarray; the frontline troops are being pulled from left to right between their customers and their Credit departments. Fear reigns again as it does during most recessions. Some bright sparks (plural, this is not just one bank), probably the Heads of Credit, have imposed a strategy of actively seeking to reduce their exposure to the "Property Sector". This is invariably the largest single sector on a banks lending portfolio.

I appluad a prudent approach that is appropriate to the prevailing economic conditions. The banks have internal Lending Guidelines to cover this (ie they will shade loan to value criteria from 70/75% to 65% - despite this always being based on current values). What we are seeing now does not come in this category.

Front-line bankers have been emasculated (I wish ) and most have been relieved of their lending authority. Most decisions are made by faceless individuals at head office (this was also partly true in the past).

I have personal experience of Nat West issuing indicative terms (pretty much a 'guarantee' in the past) for £1.4m and then renege on this agreement in principal and only offering £1m. Similarly, they have declined a request for development finance on a project where they financed the land purchase only 9 months earlier - and, trust me, the proposal met their Lending Guidelines in every respect.

I have personal experience of a local business manager at HSBC taking over 2 months to make a decision on a business overdraft request of £15,000 ! He eventually confirmed it by email., moved on to another department and a colleague subsequently phoned to decline the request. Much humble pie eaten after I sent him a copy of the earlier email.

Many more empirical stories from other people abound.

There is demand for credit. Certainly a level of demand that is not being satisfied - that is not just in the mortgage market. However, in the commercial market many people have de-geared - one reason being the fear of becoming dependant on banks again. It is also a truism that there many people to whom the banks should not be lending again.

Remember that most decent banks have restructured their balance sheets. Their ability to lend is not in doubt, their capability most certainly is.

Do not forget how the banks have historically, quite lemming-like, chased profitable busines in the property sector and encoraged/fuelled growth in their lending book. At this stage of the cycle to suddenly try and cut their exposures is morally wrong - but how long is it since you were able to hold banks up as bastions of integrity ?

(note, 12D that I said "bastions").

Give it a couple of years and the b4stards will be back with their development managers calling you regularly to offer the latest borrowing deals !

Edited September 17, 2009 by Chaimai

[Abrak]

It wouldn't surprise me to learn that it may soon be mandated.

To me it already has been theoretically mandated. Take a bank that only lends to the Government 10 year USTs. Lets say it is 12x leveraged (and as I say the risk weighting for USTs I think is below 1). Its cost ratio is somewhere between 1.5-2.0% of assets. Its margin will be at least 1.7% and pre-tax ROE over 20% (theoretically risk free).

So you recapitalize the banks and finance your huge deficit.

But it must be at the expense of private sector lending.

Still it does amount to socialism in disguise.

[lannarebirth]

It wouldn't surprise me to learn that it may soon be mandated.

To me it already has been theoretically mandated. Take a bank that only lends to the Government 10 year USTs. Lets say it is 12x leveraged (and as I say the risk weighting for USTs I think is below 1). Its cost ratio is somewhere between 1.5-2.0% of assets. Its margin will be at least 1.7% and pre-tax ROE over 20% (theoretically risk free). WIN

So you recapitalize the banks and finance your huge deficit. WIN

But it must be at the expense of private sector lending. WIN There's nothing wrong with lender financing. Who can more accurately judge the risk than the guy who has to carry it. I used to do hard money lending before everyone started to get money for free. It was a great business and my customers loved me versus dealing with banks. 35% LTV first position loans. Problem is now no one's got any equity.

Still it does amount to socialism in disguise. I think the handwriting has been on the wall there for years . It's a done deal. Just waiting on the Baby Boomers to get old enough to need government sponsored healthcare.

Edited September 17, 2009 by lannarebirth

[Abrak]

Personally I dont think the Fed will monetize debt, I think they will use this process to finance the deficit.

The risk weighting in Thailand for government bonds is I believe 20% while commercial loans is 100% so a banking system with x amounts of commercial loans and can take on 5x as much government debt for the same equity. Imagine that. So in some sense US$500bn of lending to the government is the same as US$100bn to commercial sector. At some point banks are recapitalized, short term rates raised and lending to the commercial sector becomes sensible, which results in a fall in the deficit.

The Fed works for the banks not for the economic benefit of individuals.

[lannarebirth]

Barclays will use a different accounting treatment to take "a longer term view" that will provide "a boost to its capital strength by punting the issue into the long grass", Ian Gordon, banks analyst at Exane BNP Paribas, said.

= creative accounting

When it all blows up and they haul whichever scapegoat they have selected before Congress, I'll be listening for "my dog ate my balance sheet".

[hhgz]

"To Washington and Wall Street..."

What a hilarious post! Thanks for the laughs.

[AlexLah]

Personally I dont think the Fed will monetize debt, I think they will use this process to finance the deficit.

Maybe you missed this one Abrak?

http://www.zerohedge.com/article/feds-ust-...-scheme-exposed

The Fed setting up entities in for example the Cayman Islands and then telling that more than 60% of buying of UST came from external bidders (funded by the Fed/banks) if I understand correctly.

And thanks Fly for finding the time to watch that short movie/show about the Lehman disaster, at times I was rolling on the floor .

[Abrak]

Personally I dont think the Fed will monetize debt, I think they will use this process to finance the deficit.

Maybe you missed this one Abrak?

http://www.zerohedge.com/article/feds-ust-...-scheme-exposed

The Fed setting up entities in for example the Cayman Islands and then telling that more than 60% of buying of UST came from external bidders (funded by the Fed/banks) if I understand correctly.

And thanks Fly for finding the time to watch that short movie/show about the Lehman disaster, at times I was rolling on the floor .

Alexjah,

I am perfectly aware of the following...

1. Just because Bernanke says he wont monetize Government debt doesnt mean he wont.

2. In effect they have already monetized much private sector debt.

3. They have been buying USTs (but I believe they will write that off as repurchases)

4. Monetizing government debt would seem the most obvious and easiest solution.

I just am not sure that the general assumption of monetizing the debt is the correct one for a couple of reasons...

1. Monetizing debt would be self destructive of the Fed. The Fed works in its own interests.

2. Irresponsibility shown over the last 18 months was to preserve the banking system or its major shareholders rather than to promote growth.

3. There are alternatives which benefit both the banking system and finance government debt (possibly to the detriment of overall growth.)

I just see there are 2 sides to the argument and in particular I do not see it is in the Fed's personal interests to monetize government debt (at least at the moment). I do think it might eventually be forced to monetize to protect the banking system.

[AlexLah]

Personally I dont think the Fed will monetize debt, I think they will use this process to finance the deficit.

Maybe you missed this one Abrak?

http://www.zerohedge.com/article/feds-ust-...-scheme-exposed

The Fed setting up entities in for example the Cayman Islands and then telling that more than 60% of buying of UST came from external bidders (funded by the Fed/banks) if I understand correctly.

And thanks Fly for finding the time to watch that short movie/show about the Lehman disaster, at times I was rolling on the floor .

Alexjah,

I am perfectly aware of the following...

1. Just because Bernanke says he wont monetize Government debt doesn't mean he wont.

Abrak, what do you mean by that statement as you said you do not believe the Fed is monetizing debt.

2. In effect they have already monetized much private sector debt. (confusing statement, see your reply 1)

3. They have been buying USTs (but I believe they will write that off as repurchases) Very interested how that is called in the books in the future.

4. Monetizing government debt would seem the most obvious and easiest solution. (See 1). how about public debt

I just am not sure that the general assumption of monetizing the debt is the correct one for a couple of reasons...

1. Monetizing debt would be self destructive of the Fed. The Fed works in its own interests.

Please see my previous post Abrak, The Fed is setting up companies outside the US and classify them as external buyers while funded by the Fed.

2. Irresponsibility shown over the last 18 months was to preserve the banking system or its major shareholders rather than to promote growth.

3. There are alternatives which benefit both the banking system and finance government debt (possibly to the detriment of overall growth.)

I just see there are 2 sides to the argument and in particular I do not see it is in the Fed's personal interests to monetize government debt (at least at the moment). I do think it might eventually be forced to monetize to protect the banking system.

Are you working for the government Abrak?

[Abrak]

Alexjah,

Take a very careful look at this chart of the Fed's balance sheet.

http://blogs.wsj.com/economics/2009/07/16/...t-71609-update/

You will notice in 2008 they sold almost exactly US$300bn of USTs to bail out the banks. They then a year later announced a program to buy exactly US$300bn of USTs. In some respects this is reverse QE - where you buy and subsequently sell. Net net the Fed is left with exactly the same amount of USTs as it had in 2007. It has not been a net buyer or a net seller over the period. This is very deliberate policy. You cant believe they picked US$300bn out of thin air? (hence I referred to it as repurchases (of previous sales).

The balance sheet has expanded by purchases of private debt which in one way has been monetized but is more an increase in velocity.

Re-zerohedge - lets face it is peanuts. And if true simply shows they have no intention of monetizing debt unless they have to. If they get around to monetizing debt I believe it must exceed US$500bn not US$10bn hidden in the Cayman isles.

Just look at the clever game the Fed is up to Alexjah?

I dont work for the government and neither does the Fed. That is the whole point they will protect their credibility rather than bail out the economy.

Finally my comment about Bernanke was meant along these lines - my 'guess' he wont monetize debt is not based on his word rather more about the Fed acting in its best interests. Bernanke's word is not really a good argument to justify much.

Edited September 17, 2009 by Abrak

[flying]

So they buy 300B to help offset what they printed...

But now we are in trillions deep.....what next?

But........

What do they use to buy the UST back?

Amazing this merry go round worked for so long

[Abrak]

And by the way as a theoretical concept isnt it idiotic to monetize debt through the Fed if there is no money multiplier. I mean 1 isnt much of a multiple.

[flying]

End The FED poll is running 80+% to 9% in favor of ending the FED

http://www.cnbc.com/id/32881898

[Abrak]

So they buy 300B to help offset what they printed...

But now we are in trillions deep.....what next?

But........

What do they use to buy the UST back?

Amazing this merry go round worked for so long

Ok so I hope you understand why (Bernanke and the Fed) will deny monetizing 'government' debt and why I said they had monetized private debt (to some extent).

Now here is where I think it gets confusing. The increase in the Fed's balance sheet is seen by many as a high powered increase in money supply because they are thinking of fractional reserve banking. Essentially though there are no reserves for US banks and this went out of the window some time ago. In fact the Fed balance sheet represents excess reserves which are not really even money supply to some extent because they are not part of the economy. What the Fed did was swap Fed paper (which has a high velocity) with things like MGS which had no velocity (because of the crisis) so preventing V from massively collapsing and causing deflation.

Look at the difference between M1 and M3.

http://www.shadowstats.com/alternate_data

M1 is hardly causing an expansion of broader money supply.

And 'printing' is rather harsh because what the Fed has done is increase both sides of its balance sheet (without any equity).

[Abrak]

So here is an alternative to monetizing debt that makes much more sense to me.

USTs are zero risk weighted so that a bank with US$1 of equity can have US$99 of deposits and US$100 of UST. Alternatively they can have US$12 of private lending. So now we are talking about a serious multiplier combined with bank sector recapitalization.

Surely that has to be the game plan rather than monetization.

[flying]

In fact the Fed balance sheet represents excess reserves which are not really even money supply to some extent because they are not part of the economy.

And 'printing' is rather harsh because what the Fed has done is increase both sides of its balance sheet (without any equity).

But does it affect the global economy?

We would all like to increase our balance sheet without equity but,would we probably be jailed for fraud ?

[flying]

Exclusive Interview: Congressman Alan Grayson Talks Fed Transparency and Missing Money

In May, a cool and collected Congressman Alan Grayson questioned the Federal Reserve Inspector General about the trillions of dollars lent and spent by the Federal Reserve. Inspector General Elizabeth Coleman said she had no idea where the money went. Two months later, Congressman Grayson asked Federal Reserve Chairman Ben Bernanke the same questions. Here is the exact exchange:

Grayson: “So who got the money?”

Bernanke: “Financial institutions in Europe and other countries.”

Grayson: “Which ones?”

Bernanke: “I don’t know.”

Grayson: “Half a trillion dollars and you don’t know who got the money?”

Damien: Congressman, what do you say to the primary criticism that auditing the Fed’s book is like exposing confidential information which can lead to harm?

Congressman Grayson: The Fed made that exact same argument in court and recently lost across the board in the case of Bloomberg LP v. Board of Governors of the Federal Reserve System [u.S. District Court, Southern District of New York (Manhattan), No. 08-9595.]. The judge looked at the facts and noted that shining a spotlight on what the Federal Reserve’s actions will only be a good thing. So, that argument has been demolished based on the evidence.

Full Interview

http://wallstcheatsheet.com/knowledge/inte...-money/?p=1878/

[flying]

Thursday, September 17, 2009

Treasury To Sell $112 Billion In Notes Next Week

NEW YORK -- The Treasury Department said Thursday it will issue $112 billion in notes next week. A record $43 billion in 2-year notes will be sold on Tuesday, followed by $40 billion in 5-year debt on Wednesday. The final offering will be $49 billion in 7-year notes on Thursday. The amounts are each $1 billion more than last month -- the most ever for each security -- and in line with estimates of some of Wall Street's biggest bond dealers. The government will also sell $85 billion in shorter-term bills. After the announcement, 2-year note yields, which move inversely to prices, remained up 1 basis point on the day, at 1%, the highest this month.

http://www.foxbusiness.com/story/treasury-...ion-notes-week/

[Abrak]

In fact the Fed balance sheet represents excess reserves which are not really even money supply to some extent because they are not part of the economy.

And 'printing' is rather harsh because what the Fed has done is increase both sides of its balance sheet (without any equity).

But does it affect the global economy?

We would all like to increase our balance sheet without equity but,would we probably be jailed for fraud ?

All I am really saying is there are a lot of options for the Fed before it monetizes.

Very simply creating money by the Fed to buy USTs would create a profit that would go back to the treasury.

So as the simplest alternative the Fed lends ten year notes to banks at zero percent interest so they buy the ten year treasuries. They profit, get recapitalized and the Fed is looking after its shareholders. As USTs are zero weighted and the cost of funding is zero you havent even effected their capital adequacy and it will have improved as the profits come through.

And as USTs are zero weighted you can by the way increase your balance without equity (subject to funding) without any problem.

Look I admit there is going to be some creative measures taken over the next few years, I just dont believe they will be the obvious ones. And most of all I do not think the Fed will take actions against its interests to save the economy.