My brother who works for BNP PARIBAS sends me telegraph style news
Lehman Brothers to file for bankruptcy protection
BoA to buy Merrill for around USD 50 bio in shares
AIG seeking a USD 40 bio bridge loan from the FED
FED to lend to banks by taking stocks as collateral
A consortium of 10 banks creates a USD 70 bio fund to ensure liquidity
AIG got support from the FED even faster than I thought they would. Basically overnight!
FED takes STOCKS from banks as collateral??? Did you read that! This may be the best trade in the world, ever. FED is THE long term holder of last resort (LTH-LR), FED could be making a killing on this. This may have the capacity to completely stabilize the crisis. I am optimistic for this move.
I haven't read the consortium bit. I can understand it as a way to safeguard against future crises a la an LTCM fund but generalized. The FED doesn't have to broker agreement with all the heads of family at the last minute. The number sounds small, but if this is cash or cash equivalent, this is a significant draw for the banks involved. I need to read up on it.