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Fed Says Will Test Liquidity Extracting Reverse Repos (Including MBS) Even As It Prepares To Flood Market
Someone please slip some lithium to the ES trading desk at Liberty 33. While all of last week the general public had to endure the Fed's various public talking heads' platitudes threatening an imminent round of massive liquidity infusions unless Joe Sixpack went and bought the highest beta stocks available, here come the bipolar futures traders from the FRBNY, saying that Bullard and Bernanke were only kidding, and instead they are about to go ahead and withdraw liquidity in the form of various triparty reverse repos. Only this time the Fed will also allow assorted MBS of dubious quality to be tested for collateral purposes, which we are certain the banks will be delighted to provide the Fed cash against: "Beginning tomorrow, New York Fed intends to conduct a similar series of
small-scale, real-value reverse repurchase transactions with primary
dealers using all eligible collateral types, including, for the first
time, agency mortgage-backed securities (MBS) from the SOMA portfolio." At this point the Fed's behavioral psychology experiment has reached such grand proportions that it is willingly shotgunning the most contradictory statements in the open just to see if the ES will rise a few bps without Liberty 33's intervention.
From the New York Fed:
As noted in the October 19, 2009 Statement Regarding Reverse
Repurchase Agreements, the Federal Reserve Bank of New York (New York
Fed) has been working internally and with market participants on
operational aspects of triparty reverse repurchase agreements to ensure
that this tool will be ready if the Federal Open Market Committee
decides it should be used. In the November 30, 2009 statement, New York
Fed announced a series of small-scale, real-value transactions with
primary dealers using U.S. Treasury and direct agency debt securities
from the System Open Market Account (SOMA) portfolio as collateral.
Beginning
tomorrow, New York Fed intends to conduct a similar series of
small-scale, real-value reverse repurchase transactions with primary
dealers using all eligible collateral types, including, for the first
time, agency mortgage-backed securities (MBS) from the SOMA portfolio.
Of note, in contrast to the SOMA holdings of U.S. Treasury and direct
agency debt securities which are maintained in an account at New York
Fed, the SOMA holdings of agency MBS securities are currently
maintained at a custodian. As a result, certain operational and legal
arrangements for transactions involving agency MBS collateral differ
from those in place for transactions involving U.S. Treasury and direct
agency debt securities as collateral.
Like
the earlier operational readiness exercises, this work is a matter of
prudent advance planning by the Federal Reserve. It does not represent
any change in the stance of monetary policy, and no inference should be
drawn about the timing of any change in the stance of monetary policy
in the future.
These forthcoming operations
are being conducted to ensure operational readiness at the Federal
Reserve, the triparty repo clearing banks, and the primary dealers. The
operations have been designed to have no material impact on the
availability of reserves or on market rates. Specifically, the
aggregate amount of outstanding transactions will be very small
relative to the level of excess reserves, and the transactions will be
conducted at current market rates.
The
results of these operations will be posted on the Federal Reserve Bank
of New York's public website where all temporary open market operation
results are posted. The outstanding amounts of reverse repos are
reported as a liability item in tables 1, 10, and 11 in the Federal
Reserve System's H.4.1 statistical release.
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Well, if you don't know it you're coming or going, it's a good strategy to make sure no one else knows either.
i aint buyin it, so i hope you aint sellin it...as far as i am concerned this is code being sent to the BD (TBTF banks) of both direction and timing of an engineered move. And well since we have gone up in a parabolic fashion in the markets - my guess is that they are signalling for a collapse of the markets..... what say you?
Parabolic? Have you looked at the indices, they have NOT gone up in a parabolic fashion.
Daily GBPUSD is one that DOES look a bit more parabolic.
Do I think the stock indices should be where they are? NO.
DavidC
davidc you are in fact correct..parabolic would be an incorrect descriptive for overlapping corrective moves up from the 1010 interim s&p low. although parabolic aside, i am suggesting that certain fed actions signal intentions to the BD's... this may in fact be one of them as it seems inappropriate in its timing.
Doggis looks to me like the reality is theyre only get only small upside fraud pumps on the markets with huge effort, billion for a buck. I think youre right though they've hit the wall, the gubmint certainly NEEDS most right now fear and panic, so I believe youre right get set for some horrible event and a market plunge.
Bingo.
M3 -10%, MB growth -90%, MM < 1 augur debt deflation of all financed assets including derivatives.
Tyler: HAHAHAHAHAHAHAHA BEST POST!!!
Seems to me they would offer minor lip service to the "bond vigilantes" (who may not in fact exist) while buying stocks per Greenspan's "higher stock market means happier citizens" idea.
LOL -- the Open Mouth Committee got its talking points confused. "In order to save the village, we first had to destroy it".
Lets see all They wanna do is - slip a few Tril to various and sundry bankrupts, the govt, friends and assorted folks who ar umm a leetle liquidity constrained. But - they dont want a parabolic rise of prices of everything - which would signal,correction- not signal- would BE, hyperinflation.(Note that these days everything is always a "signal" - nothing is ever "reality".)
Dont they teach a course in how to do that at priceton?
"The last duty of a central banker
is to tell the public the truth."
- Alan Blinder, former Vice Chairman
of the Federal Reserve
Is it possible this has nothing to do with QE and more to do with China saying AGAIN they want to cut back on Treasury buying?
The deck chairs are going to be bouncing around like pinballs.
How are we doing? - The Fed:
http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm#3
What are the Federal Reserve's responsibilities?
Today, the Federal Reserve's responsibilities
fall into four general areas:
• conducting the nation's monetary policy by influencing money and
credit conditions in the economy in pursuit of full employment and
stable prices
• supervising and regulating banking institutions to ensure the
safety and soundness of the nation's banking and financial system
and to protect the credit rights of consumers
• maintaining the stability of the financial system and containing
systemic risk that may arise in financial markets
• providing certain financial services to the U.S. government,
to the public, to financial institutions, and to foreign official
institutions, including playing a major role in operating the nation's
payments systems
Any private Co. would have closed it doors
long ago after such gross incompetence and
failure...
ps: they don't have a clue about what
they're doing. Just look at Greenspan,
for example.
Um, they ARE a privately held company. Banks own 'stock' in the Fed branches and earn 6% dividends on their stakes.
And they do know what they are doing - in a sense - systematically benefitting their shareholders (banks) at the expense of everyone else...
But I do agree that they have lost a bit of control over the situation.
It will not work if it in honest, as banks can not handle the huge devalued paper junk at face value like the Fed paid. Of course the Fed could just take a haircut on the paper, but that may be considered illegal. Then again the private bank Federal Reserve is already doing many illegal activities such as buying fred/Fann paper so like the worthless CFTC and SEC, there are no more laws for TBTF and central banks to abide by, nor full audits or FOIA to be worried about. The massive fraud against the US taxpayers will continue unabated.
"Of course the Fed could just take a haircut on the paper"
That would mean the Feral can't sterilize those previous purchases should inflation get out of hand, huh? That would be a bad thing to definitely prove, no? I honestly don't think anything is afoot, mind you, I think these guys are spinning wheels and dials screaming "But this HAS to work, this time! My model says so!", but if something WERE afoot, this could be a test.
Somebody got a sneak peak at Friday's payroll data?
Lithium indeed, the clowns that are running this show are manic depressive lunatics and should be force fed chemical restraints before being carted off to the loonie bin!
I had to laugh at this story, total 180 shift from last week to this week. First it was threats of massive flooding of new printed fiat, now its 'just kidding folks, we're actually going to WITHDRAW the fiat'...and markets virtually unchanged. Back to 'all is well'. And besides its Shark Week on Discovery and theyre showing Jaws marathon on AMC.
According to Russell Blaylock, Board Certified Neurosurgeon,
it IS the Lithium and Fluoride in the water plus the chemicals in foods and shots...
http://www.holisticmed.com/add/blaylock.html
And the Fed is running a new policy based on Pure jawboning and nothing but jawboning. QE2? Show me the money. Reverse Repos during QE2? Trying to calm some raw nerves perhaps?
Now I get why Gold is finding new firmness
Like SnoopDog said in Training Day- 'I smell bacon up in this motherfuker'.
They tried this already. The result was FAIL
The last one went off swimmingly If I recall?
I thought the point was not to reduce liquidity and raise rates but to take or confiscate savings (keynesians are Fabian socialists) and swap cash for assets like treasuries. Our money markets and savings accounts will have treasuries and toxics as collateral while the Fed illegally pounds deflationary money and credit contraction with confiscated cash. Let's think about how Bernanke has failed on numerous attempts to deflate money supply and save the economy: -quantitative easing 1 fails - buying treasuries on the open market and those bonds for a second time via primary dealer swaps and offshore purchases failed -credible threats of driving the dollar to zero has created a carry trade which blew up and created a margin call which drove the dollar back to 89 dxy -illegally swapping toxics and collateralizing those has not made the dollar go to zero -stealing savings and money markets ( like gold confiscation act on the 30's) and giving the cash to banks to flood the market has not increased lending nut has just increased high risk trading and/or increased savings by purchasing bonds( the great bond meltdown never happened) No matter what he does, Bernanke cannot compensate for the price breakdown of all asset classes except metals. Money is valued as asset value( homes etc) and outstanding credit extended( default rates rising) and knickey-knack savings and cash etc. reverse repos is pissing on a forest fire. The economy is doomed and all Bernanke has managed to do is load up on more debt creation at the worst time- a depression. Taking savings and throwing that at the depression will do nothing except destroy cash savings and buying power. The credit system is dead,dead,dead
Yeah yeah....
(to be read to the voice of John Wayne, finest American economist in history)Here's whut we're-a proposin', so listen up an' list'n good, little grasshopper...
We'r-a-gonna drain some o' them reserves from the bankin' sys-em with reverse repos, an' we'r-a-gonna add some o' them reserves to the bankin' sys-em with ah QE2, an' not change our balance sheet none, sos the achual total effec'll be ta' sterinize the whole operachun, ju's be given' them Wall Street banks summore them cummusshuns, Pilgrim.
Buncha fucktards. Talk about draining credibility from the system...........
'In order to save the village, we first had to keep it hopeless confused' seems to be the order of the era.
My take = when the crisis first got cranked up, Bernanke and Fed truly believed their own press, namely that they could save the world. Hence, Bernanke's scheme to pay interest on reserves which, per Ben, would allow the FED to infinitely expand its balance sheet. This sounded powerful, but it was largely window dressing. The 'money' to expand the asset side of the balance sheet (buying and supporting the MBS/GSE market) came from the 'money' flowing onto the liability side of the balance sheet (skyrocketing reserve deposits from the banks who were off loading the MBS/GSE.
Rather than constituting 'printing' this exercise was simply polishing the banks' financial statments in order to allow them to 'raise capital' at a time when the Treasury and FED realized they needed to do that. A financial statement loaded with 'money deposited at the FED' looked a lot healthier than one loaded to the gills with MSB/GSE paper. To this extent the operation was 'mission accomplished' to some degree.
But when the FED got a look at the crud now loaded up on its balance sheet, suddenly 'infinite expansion' didn't look like such a great idea. So QE 1 ended. Now, however, the FED is shifting to self preservation mode and is flailing around for means to offload the crud back onto, well anybody, but the banks will do for starters.
FED self-preservation will trump efforts to save the world, resurrect the economy and what not. Like most all organisms and organizations, an engaged self preservation instinct will trump all other motives.
Great, now the Fed is pinging the market. I bet Goldman gets the results first too, so they will have time to front run everyone elses reaction.
There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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