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Foreign Currency Swap Amendment Passes House Financial Services Committee
The amendment proposed by Alan Grayson and Ron Paul to require the written concurrence by the Treasury Secretary prior to engaging in any foreign currency swaps, has passed. No more will Mr. Geithner be able to wash his hands when he bails out the banks that hold trillion dollar short positions and keep crushing the dollar, until such time as the biggest groupthink trade de jour unwinds and the BOE, the ECB and SNB come crying to papa Tim asking for a few hundred billion. That, plus Mr. Bernanke will be forced to disclose and get the approval of the TurboTax expert when he feels like providing his fellow fiat money printers a helping hand as they continue to rape and pillage the dollar's purchasing power.
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Hopefully the first of many steps toward regaining control of our country, this is an achievement indeed.
DXY @84? Really now
TD - where the heck are you that it is 16:43 at this post? On a ship in the Atlantic? Diving for the Titanic remains (which would be appropriate)?
And no, I am not a fed trying to discern your exact location. No...no...no... pay no attention to that man in the black suit outside your office.
Just idle curousity. Really.
If you look at 1. and 2. It's still an inside job,,,Ya I trust the BOG and the Secretary of the Treasury.....
Congress:
Timmy, it says here you approved this..
Timmy:
Ya, it seemed like a good idea at the time...
"No more will Mr. Geithner be able to wash his hands when he bails out the banks that hold trillion dollar short positions and keep crushing the dollar, until such time as the biggest groupthink trade de jour unwinds and the BOE, the ECB and SNB come crying to papa Tim asking for a few hundred billion. That, plus Mr. Bernanke will be forced to disclose and get the approval of the TurboTax expert when he feels like providing his fellow fiat money printers a helping hend as they continue to rape and pillage the dollar's purchasing power."
Please tell me this is sarcasm? The foreign currency swaps with other central bank have nothing to do with the decline in the Dollar - which is still higher versus Euro, Sterling and SFr than prior to the crisis - but rather the role of the central banks in unfreezing the interbank lending market by taking the direct risk to their domestic banks...
Man, With what is equivalent to an unlimited USD credit line from the Fed, I submit that under these current swapline arrangements, no foreign financial co. has ANY external USD funding risk until this agreement is terminated. That has to effect the exchange value of the USD no?
I assume you have read this: http://www.zerohedge.com/article/how-federal-reserve-bailed-out-world
I was right in the thick of it at the time. I don't dispute that the collapse of the US Dollar interbank market (long term assets and short term liabilities kills you in the the long term) and the swaps between central banks were the reasons why we had the spike in the Dollar and why it came back, but I think it is plain wrong to say these central banks are using these proceeds to short the Dollar. These central banks on-lend these proceeds to their local banks (hence neutral) who need these Dollars to offset pre-existing loans (or maybe they buy Treasuries?)
The Fed on the other hand receives foreign currency that it does not need, why aren't they using these proceeds to buy higher yielding assets, thus using the foreign currency as a carry trade?
As for what will change by needing the sign-off of Fed Board members and the Treasury Sec escapes me.
The big lesson here is foreign banks need to stop relying on the Dollar money markets (match the term of the loan with the term of the borrowing as refinancing risk exists for all) and it shows the vulnerability to the world economy by having a global reserve currency which is it so at risk to the arrogance and hubris of Wall Street.
In the absence of an entity like the Fed stepping in at these times, other nations would have no choice but to consider alternatives for the global reserve currency, which is not exactly bullish for the Dollar... so be careful what you wish for...
Mr Q, since you were "in the thick of it at the time," perhaps you could enlighten us why the TED spread is rising today? Curious minds do want to know. ;)
http://charts.dacharts.net/2009-11-19/Lionhead%20TED%20spread.png
Ted Spread may be THE single cleanest coincident, if not outright leading, metric for the intermediate degree shifts within financial markets and collective social mood. Ahhhh, doncha just love the smell of Primary wave 3 (circle) in the morning !
Well, Libor is hardly going to go negative is it?
duplicate
Uhhh? Ohhh? There is only one central bank actively shorting the $, and that's the Fed. Why sould any European central bank be interested in a weak $??? Come on wake up!!!! Who will be buying useless GM cars at a discount price? Germany, the biggest producer of cars which actually work (and can not sell)? Say no more ....
could this be the reason t-bills went negative
It's not long enough. All the good bills are at least 1,000 pages.
this amendment is a crock....the fed or treasury has no business intervening at all to save any foreign bank....not even domestic ones....and should not even be involved in currency swaps...and that is what the amendment should have required...
This all assumes any of them ever follow "laws." The law is for us serfs. Pass all of em ya want, they will do what they do any way. When you have broken so many of them, why worry about breaking more? When you already have infinity prison time coming to you, what is infinity + 20 years?
Wow, I admire you so much from afar I had to say thanks. I have nothing to say but let them eat cake.
$ BITCHES
Hi Dry Drunk!
You remind me of a friend! What is your take on oil? :-)
Hello MsCreant
Thanks for the question, I'd like to think I am a friend.
Oil? The oil dribbling off my lips? The word of the wise?
Burn it all!
DD
I think you're wrong on this issue. The foreign currency swaps aren't to bail out banks short the dollars. Banks have funding mismatches between their assets and liabilities and scrambled for dollars to unwind this mismatch. Did that mean they were "effectively" short USD, yes, but that wasn't a directional bet, it was a funding bet. Unfortunately if you want the privilege of issuing the reserve currency, you must supply said currency in order for it to be used as the medium of exchange. And if the world is short of it on a temporary basis, you must provide it on a temporary basis. This actually has no negative ramifications on the US as the swaps are unwound and the excess reserves that were the liability side of the Fed's balance sheet are not supporting UST and MBS. Not sure what the overall issue is and why people are so up in arms about this particular issue. Unless you don't want the USD to be the reserve currency, which I actually don't want it to be, but not because of pressure on currency swaps.
I agree. What is wrong with the currency swaps? The Fed is lending to other major central banks. There is no market risk and very little credit risk to the Fed. Why is this such a big issue? Is it to serve as a distraction to real issues?
Final Passage of this bill is being DELAYED. The vote proceeding now is only on the "admendments" (not the actual bill). I believe it's time for the American people to start getting pissed off.
sorry, unrelated but i just noticed that the perennial whipping boy of zerohedge (ally, the afterbirth of gmac) has a banner ad currently occupying the space at the top of my screen. so its come to this, zerohedge taking government bailout bucks from zombie institutions. really tyler . . . really?
Google's sense of ironic ad contextualization is not lost on us.
One of the most hilariously ironic things I've seen ...
Tyler: if possible, could you write a post know when 1) the giant diamond ad pulls their account, and 2) when the buy gold now accounts peak as well, my guess is that they already have.
Great article. But with both the FED and the US treasury having taken any actions so far almost always indicating as if they are one, will this amendment make any difference to foreign currency swap operations going into the future?
Yeah! My CAPTCHA question was rated 7-9 years, but it only took me 3 days, two calculators, thirty-seven tries, and I had to wait for the same question to come up in this post again, so I could get it right, and submit my comment.
If this sounds like you, please do the rest of us a favor, and don't hit the save button.
Thank-you.
nice start...but he's got a long way to go...even if you assume Barney backs this, has anyone considered how the other body might react?
hence the need for consistent application of pressure.
calling and writing to one's representatives does make a difference.
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
Audit the Fed, Audit the Fed, Audit the Fed,
The foreign USD supply was liquify those required to hold/buy USTs and facilitate the increase in US's sovereign debt.
Kudos to ZH on its searing, on-the-pulse introductory paragraph.