Discount Window Borrowings Spike To Highest In 2011

Tyler Durden's picture

There was a time when depositor institutions (which nowadays paradoxically includes such entities as Goldman Sachs and its millions of ATMs crisscrossing the land), not flush with unprecedented amounts of bank reserves (which just hit an all time record high of $1.59 trillion), would go to the Fed's discount window for short-term funding needs: a stigmatized act which telegraphed to the street that the borrowing bank was undergoing some form of liquidity crunch. Not surprisingly, the Fed fought tooth and nail to prevent discount window disclosure from becoming public, especially since it was later discovered that the biggest recipients of Fed Discount Window generosity were foreign banks, and especially Dexia. We bring this up because going through the Fed's weekly balance sheet update (yes, it just hit a new all time record, and yes, we will provide a full breakdown soon) we find that weekly borrowings across the Fed's three discount window facilities, Primary, Secondary and Seasonal Credit, surged to a 2011 high of just over $100 million, and also saw the very first usage of the "reserved for really ugly bank" Secondary Credit Facility in the current year to the tune of $9 million. Yes, in the grand scheme of things this is a modest number, but when one considers that with all the liquidity sloshing around there should be no discount window borrowings at all, the fact that we have had such a dramatic spike is troubling to say the least. As for the culprit, we have one guess. If proven correct, this would mean that the emergency liquidity provisioning system of the ECB is starting to get a little "problematic" to put it mildly.

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redpill's picture

Gearing up for rapid economic expansion, obviously

max2205's picture


nope-1004's picture

Wasn't it around the end of June or something when all of these "under the rug" printing schemes come to an end?


No wonder commodities are getting hit.  Just one big ponzi shell game.  Say one thing to the public, do the exact opposite.

The government is not made up of elected individuals, it is a corrupt entity that requires fresh blood to come in and operate it for a while.

New government, new system, new rules, emasculated banks, and some semblance of integrity is the only way this shit will stop.

Putting cowards like shifty squiggly Tim Geithner in jail would also give me confidence in the dollar, which is why I hold PM's.


FOC 1183's picture

"an stigmatized act which telegraphed to the street that the borrowing bank was undergoing some form of liquidity crunch"

how quaint

knukles's picture

Look at it this way.....
There're 3 borrowing facilities.

Primary.  That's where Goldman goes for unlimited free money from the public trough as in "Our primary source of funds."

Secondary.  That's where everybody else has to go to for money, reardless of cost or "ancillary" terms.

Seasonal.  Where the EU goes because of this, that, whatthefuckever and Juncker says; " It's all due to the upcoming beautiful August weather in the Agean."

I think I need to buy a gun's picture

cramer says to buy home depot because people are fixing their houses up but not paying their mortgages....WTF

tekhneek's picture

That's your own fault for listening to that jerk off. The guy's a talking fucking head. I tried to read one of his books once when I was younger, I closed it mid-way.

Guy makes no sense.

strannick's picture

Fer a purdy lady, yew shure got a dirty mouf.

rufusbird's picture

Well shit, he was under the gun, what do you expect. When he was told to pump HD he only had a few minutes to come up with some rationalization....

knukles's picture

The reason Cramer was pumping (tee heeh) Home Depot and Restoration Hardware is that he's polishing his knobs.
Any other questions while I'm here, tonight?

wombats's picture


Who cares...

It just sounds like more foreign aid dressed up under a different name...

johngaltfla's picture

One liquidity crisis coming up.

Caviar Emptor's picture

I hear that sucking sound of a straw at the bottom of an empty glass. The banks have just burned through the Fed's 2008-10 recapitalization. Even with the benefit of legalized lying (mark to unicorn) and a bulging Fed balance sheet, bailout programs galore, secondary stock offerings supported by QE and the Bernanke put, risk free liquidity from QE, interest arbitrage off the Fed's near zero rates........they're STILL impaired. 

The closets at headquarters are bulging with skeletons and half-rotten corpses of defaulted, defaulting and about to default loans. Yet there was no penalty for bankrupting the country. Just business as usual. Booya!

monkeyshine's picture

Yes, but what the hell is going on?  I know, that is what we argue about here, it is not so simple as many like to put it. On the one hand you have so much liquidity in the form of QE1/2 and TARP and other programs. Is this a liquidity trap?   That would mean deflation.  Houses are deflating, CRE is delfating, commodities are inflating, CPI will probably have to jump because I know producer costs are climing fast yet Wall Street hasn't yet shown the pinch to margins.  Now with this report we see more borrowing, all time high borrowing in fact... Does that mean the recipients of all that previous aid are hoarding? Or is it mostly a foreign debt issue with all these banks on the hook for so many Euros they need a lot more cash to justify their leverage?  Is this borrowing from the "not too big to fail but we don't want to let them fail anyway because they can't get private equity or credit, especially foreign banks with foreign debt exposure?  Or is it that these banks are on the opposite sides of so many derivatives (what is that, $150 trillion in derivatives total booked value (I shudder to think what mark to market might do to those??) and other deals that the Fed has to keep everyone afloat? Me be so confused. Or maybe me gets it. Me dunno.

Caviar Emptor's picture

Globally, it's just about all of what you listed above. Big picture, since the crisis of 08, the banks were recapitalized and, to the extent politically possible, were cleaned of their "bad assets". That followed the so called "Swedish Plan". In addition, derivatives were sheltered in SIVs and were obscured by repeal of MTM. That was enough to keep the doors open and the lights on at nearly full capacity with very little downsizing for about 2 years. 

But here's the trouble: the plan was devised on the assumption that the economy would pick up in a V-shaped recovery, and that inflation and credit creation would resume and grow. Very bad assumption. Don't forget the hubris: the Fed and global central bankers assumed they knew all the secrets to preventing the Great Depression2. They had 3 decades of wizardry and exuberance coming into the crisis and Ben in his famous helicopter speech made clear that they had a secret weapon in the basement of the Fed that would act like Kryptonite against the forces of the Depression.

Now over 2 years post-rescue the funds are drying up. Business not only didn't pick up, it's tanking further: as you pointed out ResRE and CRE are a catastrophe. This week it was reported that housing has officially exceeded the decline of the 1930s. Rates are negative. Capital is fleeing. Ibanking has been anemic. And money is leaving equities. 

So major banks are now at an impasse and this is the first sign: a new spike in discount window borrowings. This is how things got started in 2008. The trouble has been that the banks ahve not been downsized in any meaningful way: their headcounts, salaries and bonuses are at boom time levels. They've been allowed to escape market forces and are the opposite of lean and mean. They want to soak the Fed and taxpayer for all that they can to keep the party going.

Madcow's picture

yes - the 'borrowing' is really just the black hole of derivatives losses coming to get a little juice to prevent "poof" its gone.  fed doesn't want that bar graph up top to go parabolic - 

Shell Game's picture

Imagine the tsunami that will be money supply if satan's iBanks open up their reserves.  The mother of all buying sprees going into HI..

jkruffin's picture

This only confirms my reasons to stay short the Euro, and watch it crash, and then watch US stocks crash with it.  Both are a complete scam tied directly to each other to play the ponzi. We are days away from the ultimate all risk assets.

HpDeskjet's picture

True, QE2 almost over and no QE3 for at least a few months (probably not in 2011). QE did NOTHING for the real economy, just made sure people moved from "riskless" bonds/moneymarket funds etc. to risky assets. When it stops, this process reverts

Caviar Emptor's picture

It even failed to move "people" to risk assets. It moved banking assets and retirement funds to risk assets. Few individual investors are left with enough cash and stupidity to be 'long and strong'. They've already been picked clean. The only bid in the market is the Fed's own, indirectly through it's minions that it spoon feeds on a daily basis. But they're broke. 

RockyRacoon's picture

OK, lookey here.   QEwhatever is about bonds and rates.   The QEs have been about keeping the Government credit card fully charged up for spending.  QE3 has already started.   Moving money out of stocks and into bonds is the goal.   They can't name that tactic as an actual Quantitative Easing so there will officially not be one.   Even though there is one.

vote_libertarian_party's picture

Probably the Bank of Greasy.


Sure, give them some emergency money.  I'm sure they're good for it.

NotApplicable's picture

If not, well... then Mr. Soros gets Athens. (though you'll never see his name anywhere!)

knukles's picture

A new neon sign on the Acropolis, hiding the newly returned Elgin Marbles ;

                                  Goldman Arena
                           Doing God's Work 24/7/365

All the street vendors selling "Sacks on a stick".

New meaning ascribed to Greek sex.

Warren's Oracle of Delphi game.  Toss in a Euro, ask a question, get no answer or change.

Turn the whole fucking country into an indebted serfdom of carny workers.   Even the Arabs and Eastern Europeans'll be going home.  The Turks will ask if they can give back their half of Crete.

All because a bunch of bureaucrats figured it'd be a good idea to establish the ultimate fiat currency, the Euro.  Not backed by any precious metals, in fact not backed by any fucking thing; no national identity, claim, no military might nor taxing authority, managed by non elected officials in a nonexistent excuse for a country


Terminus C's picture

One minor correction, the Turks and Greeks share Cyprus, not Crete

monkeyshine's picture

LOL exactly. A currency based on no nationality, with no real might, no power to tax, and with so called austerity plans that everyone faked, which everyone knows everyone faked. What the Euro really is, is a plan for Germany to make sure its currency is tied to that of some 70% +/- of its biggest trading partner countries, so that they do not have to constantly devalue their currency to keep exports moving, or intervene directly (ahem) to prop up the currencies of its trading partners.



viator's picture

It also means our tax dollars, excuse me, I meant our full faith and credit - since when you're $14 trillion in the hole you don't have any dollars - is being loaned to an insolvent and quite possibly soon to be non-existent institution.

baby_BLYTHE's picture

Don't forget over 85% are FOREIGN institutions. "full faith and credit" only for the gobalist with their gold and other hard assets secure

ebworthen's picture


Hey, we're all friends aren't we?

I mean, we wouldn't start killing each other over little things like territory, money, women, and food and water - would we?

What's a few trillion here and a few trillion there on the backs of the taxpayers of the world - after all?

 </sarcasm off>


ReallySparky's picture

Perhaps they are just like some businesses, maxing out the credit line before it's yanked.

Herman Strandschnecke's picture

 don't panic, they've yet to work down at the back of the sofa

strannick's picture

Is this the new face of QE3?

Mr Lennon Hendrix's picture

No, this is a stop gap solution, just as stealing public pensions is.  If the Treasurie does not pay pensions back then people will be told about what happened by not receiving their checks.  This will create panic, and will start a revolt against the Bernanke/Geithner policy.  If stealing public pension funds became perminant, the system would end itself because there would be no demand, as millions would not have a source of income. 

Loans from the Discount Window must be paid back first thing every morning.  They are not perminant loans.  There is no margin to be made on these loans.  They merely hold banks over until the morning, until the bank can create new assets/reserves.

To hypothesis, if these banks traded with Asia/Europe, and were able to move US debt over there and pay back these loans, then maybe this could be considered quantitative easing, but would Asia and Europe partake in this part of the fiat ponzi?  Most likely not, as they would not want to be left holding US debt.  Most likely, the Majors needed cash and one bank or more is about to go belly up.

Tic tock's picture

...and what exactly is the point of the Discount Window, if it's not made public?

NotApplicable's picture

Surely you don't expect POMO to do all of the heavy lifting by itself, do you?

I mean, something has to keep this magic carpet afloat.

Rainman's picture

...exactamundo. Baton pass to the intercontinental banksters at the cheap money window. Bernank's BTFD brigade gets a different set of commanders....all part of the plan....the banksters will steal a hefty bonus vig for their trouble. Or they might just steal it all. It sucks for sure.

Mr Lennon Hendrix's picture

This is a hot potato(e) pass between the Majors.  The Discount Window is supposed to be the loan of last resort.  These means that they have maxed out leveraged loans to each other and they will no longer accept each others' assets as collateral.  A bank, or multiple banks, are on the verge of collapse.  Is it Weells Fargo and their underwater real estate?  Bank America with the same?  Is it JPMs silver short positions that is weighing them down?  Is it JPM's derivative book?  Dimon was out parading the recovery today; was he bluffing because he wants to install hope to save his bank until Bernanke unleashing further quantitative easing?  Is it Goldman Sach's and their weird books that take both sides of every trade?  A bank is about to fail.  The question now is, which one?

FreeNewEnergy's picture

Mr. Lennon Hendrix has hit the nail on the head. I believe. The only question he did npt pose was if a major bank is going down, how much counterparty risk is taken down with it, and the answer to that question is almost too terrible to consider (or cause for celebration, if you have been preparing properly), because it could just be systemically huge, the BIG ONE.

Makes sense, why are the pols dragging their feet on the debt ceiling. Something's afoot, and if MR. LH is correct, it's going to get really nasty, really quickly.

CH1's picture

To keep the masses assured that bankers are pristine deities.

ebworthen's picture

To ensure solvency of the banks who may be insolvent but you can't know if they are insolvent because that would mean you couldn't trust that your deposits (tax dollars) are safe and being used in an ethical and moral way under the rule of law to engage in highly speculative debt instrument trades leveraged 40 to 1 on the short and long side.

Therefore, they must not disclose which insolvent banks (U.S. and foreign) are getting interest free money on the backs of you, the taxpayer, so that you don't lose trust in the system.

So, deposit your paycheck and make sure and set aside any surplus into your nearest binary data storehouse of Wizard of Oz and ignore the flying monkeys and the message in the sky that says:


Montgomery Burns's picture

........make sure and set aside any surplus into your nearest binary data storehouse of Wizard of Oz.

Surplus? Obviously you aren't married.

Shell Game's picture

The public has access to chemical crack, you wouldn't want the temptation of the discount window..

jkruffin's picture

Ireland  External Debt to GDP Ratio -  1117% as of now,  is Ireland really LNKD shares being sold as a stock?  LNKD has almost the same P/E and Ireland's debt.   Hmmm....  Keep the shams and scams coming.....


It won't end until people start getting guns and demanding real change or else....until then these crooks will keep trying to change the rules in the middle of the game to keep the ponzi afloat.  Talking about it and hoping your leaders are going to do what is right, is not going to end these fiascos.

Franken_Stein's picture


Off topic, but:


Currently here in Germany we have an outbreak of EHEC (Entero-Haemorrhagic Escherichia Coli), a mutated form of Escherichia Coli.

Over 1200 people are infected, 17 have died so far.


It causes gastro-intestinal bleeding and diarrhea as well as kidney failure and neurological intoxication.


It's a new and unknown strain of an otherwise harmless bacteria.

Travellers to Germany from the U.S. are advised to follow proper hygiene procedures as to wash hands frequently, wash, peel or cook vegetables and fruits, immediately seek a doctor when symptoms like vomiting or blood in the stool emerge.


scatterbrains's picture

maybe this bacteria got a little cesium-137 boost?

cougar_w's picture

And people still insist that the Earth is not actively trying to kill us to the last.

We have a potent enemy, me thinks.