Guess Which Two Banks Just Used Up $430 Million In Fed USD Swap Lines After A Month-Long Quiet Period

Tyler Durden's picture

Yes, that's right - the good old ECB, which had not used the Fed's swap lines in over a month, has come back with a thud, thanking US taxpayers for their generosity. The ECB just announced that it allotted $430 million in its 7-Day USD operation to two banks, for whom the dollar shortage is once again all too real and coupled with the scarcity in EUR we have been discussing over the past month: one wonders just how positioned these banks are if they have allegedly neither USD nor EUR capital in hand. This also means that when the Fed announces its H.4.1 update this Thursday it will show an increase in swap lines with the ECB (and possibly other banks) by $430 million.

As per the announcement, two banks were responsible for bidding up $430 million in 7-Day "liquidity providing" swap lines. This is in addition to the $1.032 in outstanding 84-day swaps. We wonder just which two banks, and certainly stress test survivors, were instrumental in this latest indication of the liquidity deterioration in Europe.

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Internet Tough Guy's picture

Waiting to find out if they also swapped gold with the BIS. Or are they all out of gold by now?

Sean7k's picture

Could be someone is anticipating a fall in the euro against the dollar and they are gassing up? May be the new method of recapitalizing banks by CB's. They front run the losers to help build them back up?

DarkMath's picture

Ding, Ding, Ding and what prizes do we have for Sean7K? Please open the curtain...

Yes, that's right, the Euro is toast. Or half a piece of toast. It will soon split its duties with a strong, tall blonde silent type named Juergen aka "The Nordic Euro":



youngandhealthy's picture

And that Nordic Euro is: SEK or NOK.

kaiten's picture

What has US taxpayers to do with liquidity swaps? Do you understand what you are talking about, dude?

Tyler Durden's picture

There are about 50 posts previously that should explain the issue to your satisfaction.

kaiten's picture

Well, I dont need an explanation what a liquidity swap is, but someone definitely needs one.

Tyler Durden's picture

Please remind that someone whose money is on the hook in the very unlikely event there is a Lehman failure, pardon, a total loss on the swaps.

kaiten's picture

Total loss???, what are you talking about? FED has euros in exchange and ECB has an obligation to unwind the swap at the same exchange rate as was initialized. But most importantly. It´s printed dollars swapped for printed euros. Where´s the taxpayer here? And if US(west) collapses, you´ll have other things to mull over than few billions in liquidity swaps.

Riley Wilde's picture

I more or less agree.  Sometimes ZH takes a more sensationalized than balanced view on things -- which I wish they wouldn't because I'd like to see this site as a credible alternative to the usual media spin. 

In any case, there are some additional comments on the topic here:

MachoMan's picture

American taxpayers aren't worried about the West collapsing with outstanding swaps with the ECB...  yes, the ECB may have an "obligation" to unwind the swap, but does every obligation get fulfilled in bizzaroworld? [FED acting within its charter issues aside].

youngandhealthy's picture

I agree....the risk is with the ECB who is sitting with the collateral.

But I beleive it is again the misunderstanding why the Euro is introduced. Civil wars ended with the USD in the US. Same thing with the Euro and Europe.

mephisto's picture

AFAIK those euros don't actually exist, its a loan not a swap. The USD side is immediately pushed out to the banks who need them and they enter the real economy. Tylers argument has always been something like

1) ECB receives USD, Fed receives IOU

2) Greece defaults/leaves Euro. Spain follows. Germany disbands broken Eurozone.

3) Ben phones JCT, please can we have our USD back now plus the agreed interest?

4) Phone rings and rings in an empty office in an empty building in Luxembourg....



Tipo anónimo's picture

Maybe the European crisis can't wait for August to end!

blindfaith's picture

Ok, besides providing cash to merchants for Christmas (if there is one)...what is the significance of those two weeks in December?  Expecting a run on the banks by the little people then?  Gona pay back the loan with EUROs worth more in 7 days?  War?  God knows war is always the answer when resources are thin.  Something in the air smells, and it ain'y mom's cook'in.

THE DORK OF CORK's picture

It should be obvious that hard debt monetary regimes - whether Volcker's high interest rate policey or the hard Euro stance creates massive deindustrialisation in each respective currency area.

We are now rapidly deindustrialising in the Euro periphery to sustain this madness and if the average euro user retains his purchasing power we will enter a absurd situation where Asia supplies Germany and France with cheap consumables while Ireland,Spain and others begin to re wild.

The only thing stopping this monetary malice is the rising price of oil and other fuels which is signaling the unsustainability of central banks dark designs.

MarketTruth's picture

And so WHO GOT THE MONEY from the ECB? i mean, you can't just give out half a trillion and not tell the congress who got the money, right?

Oh, wait, yes Bernanke can.

Chuck Mentzel's picture

$430 million = half a trillion ?


Refresh your math, mac.

MarketTruth's picture

Apologies, i saw it as Billion and not Million. Let us face it, using the word million seems so 1980's.

Tic tock's picture

The government part of the Federal Reserve is underwritten by the Sovereign state's ability to tax- and hence be an almost neglible credit risk. Therefore the Fed may say to the ECB, "you may presume that this coin which I exchange with you, I verily have to give." ..A central bank then makes the entries in their ledger, given and received- then net is minor, unless.. that coin was not already in circulation. In which case there is an increase in the Balance sheet. ..this is where Central Banks have a distinct edge over Commercial banks. Which is why the mandate of a central bank is for a not particularly inflationary, well-employed economy - neither too much money nor too little. ..follow that logic through and in any one instrument, Deriviatives can be not more than the size of the Global M3.  ..I think that's right..but I'm not a Ph.D.

John McCloy's picture

Those forecasting dollar weakness need to look ahead.
There is only one gold and one one king of toilet paper and that is the U.S. dollar which is the reserve currency and backed by the full might of monstrous continent near immune to invasion, geopolitical dominance of every ocean, long coasts and an unrivaled military.
If World war is around the corner as resources become scarce across the pond we have nations considerably smalller, some landlocked and bordering one another and other soon to he hungry nations of Asia with sprinkle of Middle Eastern tensions.
The ability for America to go isolationist and self sufficient trumps all options as the former prosperity is replaced by unpayable debts.
We have the agrarian advantage as well. Australia might also just make it through this.

DarkMath's picture

Very well said. The US is being paid to be the world's police man at this point. And when it's dark and chaos is creeping around the corner you want to give your protection a nice big bonus to maybe spend more time in the neighborhood.

Ok, that's a stretch but my point is the Dollar's soon to be strength against the Euro no longer has anything to do with our Fiscal Rectitude but our ability to tax along with our vast and kick-ass military. For all of the world's protestations they need us to guarantee stability.

Well I wondered how we would get paid now that we lost our job. Well the world government stepped in and hired us for security. It's good work if you can get it.

SmittyinLA's picture

"Near immmune from invasion"


Our govt actually mandates, facilitates, subsidizes and even files lawsuits to protect invasion.

We divert hundreds of billions of dollars a year from our own citizens and their growth to the growth of foreign Socialist invaders.

To say America is "near immune from invasion" represents a completely delusional view of exactly what is happening in America right now, what has happened to America over the last 30 years, and what is scheduled to happen to America (invasion wise) over the next 30 years.



mephisto's picture

Some rumours around the ECB are propping up Irish 2-yr govt bonds.

Yield has exploded to over 3%

bugs_'s picture

ECB = the thirteenth Federal Reserve Bank.

Malaespina's picture

Santander and BBVA????????????????????????

SmittyinLA's picture

I'm guessing a big chunk of that bailout money went to that portagee bank that gave the Hugo Chavez state oil company a $1 billion + loan.

What do they need loans for anyway, its not like they're buying any equipment or oil reserves.

Why does a company that steals everything AND has huge revenues need to borrow any funds anyway?



SmittyinLA's picture

I'm guessing a big chunk of that bailout money went to that portagee bank that gave the Hugo Chavez state oil company a $1 billion + loan.

What do they need loans for anyway, its not like they're buying any equipment or oil reserves.

Why does a company that steals everything AND has huge revenues need to borrow any funds anyway?



boogey_bank's picture

So, we are about to have overnight a new born child in the fx universe: the Northern euro.

Could we start a brainstorming session about it?

In particular, problem is: What have to do a joe sixpack citizen of a piigs Nation in order to HAVE A FOOT in the new Northern Euro currency?

Every contribution will be appreciated, in particular those coming from Geopol, whose analisys in post n° #350254 was excellent.

geopol's picture


Thank you...