It's 11:30 AM

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.

Comments

Juha Lindfors said…
Re: stock -- so is that going to be the penny stock of GSEs, Lehman et al dumped on fed? Just another way to move bank losses to tax payer.

Anyway, it's going to be one ugly (and historic) Monday.
September 15, 2008 at 2:53:00 AM PDT
adt43wt342 said…
Losses or ... gains. I think the point is that the Govt can be a long holder. It could be a great thing. Best deal EVER?
September 15, 2008 at 5:41:00 AM PDT
pcleddy said…
"the heads of family"

And let's all try to remember the difference between communal property and the state owning everything, the people nothing.
September 15, 2008 at 6:51:00 AM PDT
Unknown said…
This comment has been removed by the author.
September 15, 2008 at 12:33:00 PM PDT
Daniel Brum said…
This is a good summary of the weekend's events and some of the consequences to come:

http://www.economist.com/finance/displaystory.cfm?story_id=12231236&fsrc=rss
September 15, 2008 at 12:36:00 PM PDT
Post a Comment

Popular posts from this blog

Thug vs Thug: Porsche 1, Hedge Funds: 0

The latest drama is fun. VW became the largest company in the world, in terms of market cap, ahead of EXXON on a little financial market coup d'etat orchestrated by Porsche. Apparently VW stocks was on the way down, I don't know the details but many Hedge Funds (HF) were short the position. Fine. The price goes down. Porsche starts buying the anonymous float (and probably some private too?), but the point is they build a 73% market share without many people noticing. In the US you would need disclosure after 10% or so. Point is, that many HF wake up and realize that their short position is about to lose a lot of money. So what do they do? those idiots? they short cover all together, which means they buy the stock to cover the short. The stock zooms up, by a full multiplier and overtakes EXXON. Porsche makes A KILLING in the process and has robbed the city robbers to the tune of "potentially $30B". Not bad for a days worth of work. PS: hey, psst Porsche! With t...
Read more

Madrid Blog--We get sued

Image
...for having children If you are a foreigner and move to Madrid, do not, necessarily expect a warm welcome. Yesterday, we, or rather Don Mark Fleury and Dona Natali Manson ***note to Building Association of Serrrano XX, before you lawyer up, do your research. My husband spells his name "Marc" with a "c." and my first name is spelled "Nathalie;" not to mention that my honest English stone mason forbears would cringe at the misspelling of their last name to confound with that of the notorious 20th century serial killer. received an official communication from the Juzgado de Primera Instancia de Madrid, from one Don Ramiro Blah Blah, President of the Building Association of Serrano XX, a building of exactly 12 units, half of which were owned at one time by his father in law, in which it is alleged 1) "Mark Fleury and Natali Manson" have four children 2) these children own bicycles 3)and roller skates 4) and scooters ( Nathalie comment: nope sorry ...
Read more

Houston, We have a central-bank-run!

Judging by the comments, it seems many of you share my interest in understanding the recent economic news, at least Juha does. So I will continue covering that. Yesterday, my brother Carlos, who works for BNP in Europe sent me this story: Apparently we are seeing a dumping of US related assets by what is speculated to be... the Chinese. . Forget the computer attacks, Asia's sovereign funds dumping US assets would have a real impact on the economy. Credit and liquidity crises are not new and, when they turn bad, they turn bad. In 1929, the liquidity scare sparked a bank run. Banks didn't have enough cash and were defaulting, accelerating the mad dash and "bank-run" to get your money out while there was still liquidity. Then, the real economy wound up with no credit, and we all know the sad story from there. 2007 isn't like 1929. It isn't an "end-consumer" bank run. You and I are not going to the corner bank to take our savings out. Our confidence ...
Read more