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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Updates on Fed swap lines

Posted by WARREN MOSLER on October 29th, 2008


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Still don’t have totals for Fed USD swap lines extended to Foreign CBs.

Some info here from last week:

ECB Lending, Liabilities Surge to Records Amid Crisis (Update 1)

By Simon Kennedy

Oct. 21 (Bloomberg) — The European Central Bank’s lending to banks and its exposure to possible collateral losses jumped to records last week as the battle against the credit crisis forced policy makers to shoulder more risk.

The Frankfurt-based ECB said it loaned banks 773.2 billion euros ($1.02 trillion) through monetary operations, up from 739.4 billion euros a week earlier and a 68 percent surge from the first week of September. Its liabilities to financial institutions rose to 470.3 billion euros, an increase of 4.4 percent from the previous week and up 123 percent since the start of last month.

While I’m less concerned over the ECB’s increased Euro lending it nonetheless indicates problems have not subsided.

The ECB is following the Federal Reserve and other central banks in combating the credit crunch by expanding its balance sheet as it injects more cash into the banking system. The downsides include taking on more risk as it accepts weaker collateral when lending.

“The urgency of the situation means that drastic measures need to be taken,” said David Mackie, chief European economist at JPMorgan Chase & Co. “Up until a month ago the balance sheet wasn’t growing. Now the bank is creating more and more money.”

The ECB became more aggressive after the collapse of Lehman Brothers Holdings Inc. on Sept. 15 prompted banks to hoard cash worldwide. To spur lending, the central bank has loaned money for longer timeframes and offered banks unlimited amounts of dollars and euros. It last week loosened rules on the collateral it will accept when making loans to include lower-rated securities, certificates of deposit and subordinated debt.

Demand for Cash

The ECB today said it loaned banks 305 billion euros in its regular weekly auction at a fixed rate of 3.75 percent. It also provided $101.93 billion in a 28-day dollar tender at a fixed rate of 2.11 percent, and an additional $22.6 billion, also for 28 days, via a currency swap against euros.

Don’t know what the total USD advances outstanding are.

With the financial crisis spilling over into the economy, demand for banknotes has also jumped. The value of notes in circulation rose to 721.8 billion euros, an increase of 9.7 billion euros from the previous week and 5.4 percent from the start of last month, today’s ECB data showed.

The eurozone is facing a ‘bank run’ as depositors flee to actual cash. This puts the banking system at risk with their current institutional structure.

When Lehman Brothers sought bankruptcy protection, its Frankfurt division owed between 8 billon euros and 9 billion euros to the ECB, the Wall Street Journal reported Oct. 7, without saying where it obtained the information.

ECB President Jean-Claude Trichet has said that while the bank is assuming more risk, it is doing so because of the greater threat of financial meltdown. “We have made decisions which are increasing our risks,” Trichet said in an Oct. 19 interview with France’s RTL Radio. “We are facing a systemic liquidity problem of first importance.”

The ECB’s risk-taking may be paying off. The cost of borrowing euros for three months fell to the lowest level today since Lehman filed for bankruptcy. The London interbank offered rate, or Libor, that banks charge each other for such loans dropped 3 basis points to 4.96 percent today, the British Bankers’ Association said. That’s the lowest level since Sept. 12. The overnight dollar rate slid 23 basis points to 1.28 percent, below the Federal Reserve’s target for the first time since Oct. 3.

This would be near my last choice of ways to get term rates down!


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5 Responses to “Updates on Fed swap lines”

  1. Rube Goldberg Wet Dream Says:

    “Still don’t have totals for Fed USD swap lines extended to Foreign CBs.”

    I don’t accept that Warren, if you the creator of the often cited MOSLER’S LAW cannot get that info, who can? More specifically why do you accept that? Who raised you to be such a slave and accept obscurity and delays when you need updated information to make informed decisions and be a good human being borg? 100 years ago when the only way to get messages back and forth was with the pony express, having information delays of days or weeks could be tolerated, but we live in a nanosecond/femtosecond quantum physics borg society today and that should not be tolerated. I want my “quantam” currency swap information the day before it happens ;)

    Reply

  2. Rube Goldberg Wet Dream Says:

    “flee to actual cash” This terribly concerns me Warren, I can’t even begin to tell you the discussions I have had with silly humans about this meme over the years. They actually think the pieces of paper in thier hand mean more than the binary digits in the computer server storing thier virtual money. I mean I don’t get why silly humans think some russian hacker can steal their identity and virtual money and online bank accounts but then forget that folks like saddam had his own printing presses and hundreds of billions in fake supernotes.

    Then they play that meme out to it’s logical conclusion and become a “goldbug” but it is all such an illusion, why are so many humans so “fearful” and have been sold on these silly memes? Who are the boyz out there in the real world teaching young humans this stuff and to hoard PAPER and chunks of metal. Like they all think if they hoard enough paper and chunks of metal that gubbment swat team with the sniper rifles won’t have power over them to make them comply to the rules of the rest of us borg. I keep explaining to these cash hoarders and gold hoarders the only REAL money worth accumulating is HOT LEAD because that gubbmint sniper swat guy doesn’t care how much paper or metal you have, and then they start getting all hissy about prying guns from thier cold dead hands and I send them links to waco, texas and janet reno running tanks over children and then they don’t wanna talk anymore.

    I have spent a lot of my time on this planet trying to ridicule these cash and gold hoarders, but they are like fundamental religion nutz, you can’t reason with them, so Warren since I know you are a really big thinker, what should a government do with religious fundamentalist nutz who can’t be reasoned with no matter how many times you lead them to the drinking hole and they just refuse to drink?

    Reply

  3. Matt Franko Says:

    Mr Mosler,

    The only place on the Fed website I have found foreign currency swap info. is here at this link, as note 4 to Line 5. As of end of August, it only identifies $50B to the ECB and $12B to the Swiss.
    The end of September info should be out next week, and more interesting October info. may have to wait until December if this is all the Fed is releasing…

    http://www.federalreserve.gov/releases/Bulletin/0908assets.htm

    I have sent the Fed an email 2 weeks ago for more timely information but have not received a reply yet…

    Resp,

    Reply

  4. Rube Goldberg Wet Dream Says:

    Matt Franko, the government is your servant, not the other way around regardless of what Kennedy said. How long will you accept them treating you like a child and for your own good not telling you things until they have had time for them and their crony friends to profit off the info? Absolute power corrupts absolutely. When your emails fail to get the desired results, what is your next step? Have you shown up at your congressman’s office in washington and told him you are disgraced that you must drag yourself away from the web and get out of your chair to tell him you are not happy with a few crony crooks getting first access to the info? After he laughs at you and takes the billion dollar payoffs from the 40K special interest lobbyists, then what are you going to do slave?

    Reply

  5. Rube Goldberg Wet Dream Says:

    Republican senators from Alaska Matt Franko, that is what you are dealing with. What happened to the statesmen that had dignity and when shown to have acted with conflicting interests excused himself from the public eye to make way for someone of more percieved honor? Today we have convicted felons who have to be slapped around like babies and they still want to run for congress, this is who you serve slave, when will you have enough?

    Respectfully, rube goldberg’s wet dream

    Reply

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