Archive - Feb 19, 2010 - Story

The FoF was musing and marinating ice cubes, post close, when conversation was suddenly interrupted. Blackberries and Iphones lit up with the flash that the Fed had raised the Discount Rate by a quarter point. The immediate response was a scramble to establish that it was the Discount Rate only. The second move was to gauge market reaction. Once they were sure that it was only the Discount, or “emergency”, rate the muted market response was understandable. The buzz about the rate hike drew questions from some none Wall Street types on the periphery. A quick lesson in central bank money mechanics ensued. It was explained that the Discount Rate only related to the Discount Window. It was further explained that the Discount Window was where banks came when they couldn’t borrow from other banks. The Discount Rate was traditionally higher than the Fed Funds rate and borrowing at the window usually carried a stigma since it indicated that other banks saw you as a weakened credit. During the banking crisis, the Fed took pains to eliminate both the stigma and the premium. So, to some degree, the hike in the Discount Rate was a signal that the crisis phase is over and banking was returning to “normal”. - Art Cashin

• Euro's unity bid hits fine print in Greek debt drama (Bloomberg)
• China finds new ways to buy US debt (Globe and Mail)
• Rumors heat up in Europe that Goldman Sachs and John Paulson are waging attachs on Greece (LittleSis)
• Buyers fail to materialise for IMF gold (FT)
• Consumer prices rose 0.2% in January, core down 0.1%, wages did not (Bloomberg)
• We need 18 million new jobs in the next 3 years (Nation)

From FRBNY's Bill Dudley "the big banks in the United States have been able to raise a large amount of equity capital to put themselves in a stronger position. I believe that Federal Reserve actions over the last year and a half have contributed very substantially to this improvement." No doubt. Also, "the Fed and Treasury did not intervene during the recent crisis to save the financial system (and with it, some big financial firms) for its own sake. We intervened because a collapse of the financial system would have done irreparable harm to Main Street." Not to mention banker direct deposit arrangements. Oh, and game over Puerto Rico: "Over the past ten years, the [New York Fed] Alliance has trained more than 400 [Puerto Rican] high school teachers in economics and financial literacy."

• Asian stocks, US Futures fall on concern Fed move signals stimulus exit.
• Australia has less room for growth without inflation: Australian Central Bank.
• Consumer Prices in US probably climbed in January on higher energy costs.
• Dollar touches 9-month high versus Euro after Fed raises discount rate.
• Fed raised the rate it charges banks for emergency loans by a quarter percentage point.
• Greece replaces debt chief Papanicolaou as deficit crisis batters markets.
• Japan stocks fall sharply on Fed emergency loan rate hike; Nikkei down 2.1 percent.

RANsquawk 19th February Morning Briefing - Stocks, Bonds, FX

RANsquawk 19th February Morning Briefing - Stocks, Bonds, FX etc.