Fed $US lending via its ‘unlimited’ swap lines are moving up through the highs.
The Dec 18 daily average was $642,233 million, up $14,203 million from week of Dec. 10. The week ending balance was $682,431.
For all practical purposes these are unsecured $US loans to foreign central banks, who ‘re-lend’ the funds to their member banks vs any ‘appropriate’ collateral, which includes bank paper, etc.
Bernanke stated these are all good loans because they are the obligations of the central banks.
Personally, I suspect if he tried to sell the $30 billion loan to the Bank of Mexico it would only sell at a substantial discount.
The lines are set to expire in April. It could easily turn out that none of it is collectible, as a practical matter, making this entire operation functionally a fiscal transfer.
The ECB recently announced it would cut itself off as of the end of January due to ‘lack of use’ by it’s member banks, who have
something over $300 billion outstanding.
I suspect the ECB may actually be trying to keep a lid on the euro.
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