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Market Talk Fed Could Stop Paying 25 bps Interest On Excess Reserves In Effort To Boost Lending
RanSquawk reports market talk that ahead of the Bernanke semi-annual testimony tomorrow before the Senate Banking Committee, the Federal Reserve may be tempted to stop paying the 25 bps interest on excess reserves (which nonetheless have been declining recently as pointed out previously on Zero Hedge) in order to stimulate lending. Certainly, the topic of lending to what little is left of America's middle class, will be the primary theme during tomorrow's faux interrogation at which idiot politicians act confused and disgruntled that their corrupt policies have destroyed the country.
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Warming up the chopper.
the chopper has been quite active, only problem is it hovers over 200 west.
All makes perfect sense market down broad based commodity rally as the deflation chorus grows louder and louder. shameful
Someone is lending.
I get at least 3 pieces of mail a day from CIT, Master Card, Visa, American Express asking me to take advantage of getting another credit card. I don't know how many loans through CIT I have been pre-approved for but they are very persistent in getting me to borrrow $10,000-$50,000 as they send me shit everyday.
The only problem is that I've been buying gold in cash and preserving my wealth through an asset that is very hard to tax when traded hand-hand. I know my taxes are going to go through the rough and I am protecting my-self from this very unfortunate situation the government has put me in.
I will not be borrowing money for many, many years to come.
Excellent effing point - my guess is anybody who got their ass chapped with any sort of debt in the last 5-10 years will "not be borrowing money for many many years to come."
I guess lending is perhaps, to some degree, the hallmark of a healthy and expanding economy - at least in some sort of moderation - but I bet there are a lot of people out there rethinking the role debt plays and has played in their lives, and I think a lot are coming to the conclusion that simply states, "fuck that shit." - I know I have....
Everybody figured out that they had bought 2 more couches and replaced all electronics but were still paying on the original ones. People went up 2 or 3 sizes while still paying off those designer jeans. The crap didn't outlast the bill.
Just because you get those offers in the mail does not mean they will actually give you a card. I have a card that is almost maxed out(long story but had to do it) and I wanted to roll at least part of the balance into one of those 0% offers and pay it off within the offer period. Me and the wife get probably 3 or four of those offers a week and my bank (Wells Fargo) also was offering a 0% transfer on a new credit card(I only have a atm card with them currently) and after filling out the form they said thanks but no thanks. By the way my FICO score is over 700.
My FICO score is 815 and I refuse to borrow.
When the shit hits the fan my ass will be comfortably insulated from shit particles.
The best way to look at solicitations from credit card companies is instead of an envelope, you are face to face with a strange looking woman with an adam's apple... that has no shoes, socks, nor apparently any clothing under its black trench coat. Don't open the trench coat.
Not sure who they are lending to, i've been trundling along for the last 15 years or so without any need for *any* credit, no late bills, a top 10 percent salary and started doing a bit of travel for work recently. Had to get a CC from CapitalScum at 40% APR.
I just took advantage of that Citi offer. I rolled over a Credit Card balance from another Card which I did the 3% up front and 0% for a year.
Amazing. Capital One last year said that my interest would go to 17.9%. So, I paid it off. They then offered me 3% up front for 0% for a year. So, I paid my Property Taxes with the checks and got the 3% instead of the 17.9% for the same money I owed before. Crazy if you ask me.
Now Citi wants to lend me the money I still owe to Capital One which will this month go to 17.9% for a 3% up front fee and 0% interest for a year.
Count me in. I applied for a balance transfeer and am set for another year. Life is good if you know how to work it.
Why would that last .25% stir lending? They've "stimulated" credit supply out the wazoo. You need demand for credit. There is none unless they give you money to buy something but they've already pulled tons of housing/car demand forward.
Simple--they aren't making money by just sitting on money any more.
Of course, what is likely to happen is this just shifts that money into treasuries. Then, government spending can continue unabated for a while longer, until the dollar finally cracks.
Yeah but my point is lowering it to .25% stimulated little lending to begin with so what is the rest going to do? Plus they are going to couch the whole thing on the Hill as "why won't the banks lend to joe six pack" and Bergabe will float this stupid idea as some sort of an answer. Basically all the lowered interest rates have done is allow banks to make money buying assets at rock bottom prices and claim paper gains. Now that the market has pretty much peaked and we head back to the recession we never left that last .25% isn't going to do much of anything.
True, though i bet many are buying US debt at ~3% so the Fed's mere 0.25% is a waste of time/profit possibility.
that may be true but vol is a whole heck of a lot higher on those long-duration bonds than on deposits at the Fed Bank.
point stands from above - additional credit supply does not all of a sudden cause additional credit demand (although credit will, inherently, become cheaper... or will it...)
might as well start buying up bills/notes on the short end too.
Can't they slip that in the health bill or Finacial Reform (oxymoron) Bill?
OT Notice the stalemate in the ES and dismal volume, this is ridiculous.
At 1075...not much of a stalemate anymore;)
Yes notice the time I posted. Volume during that time was sometimes less than 300 contracts on a 1 minute chart. Divergence to the downside but barely fell. A real pump job today.
This whole mess reminds me of "The Rocking-Horse Winner."
Damn. And here was naive me thinking that at some point this year I would earn something on my savings account.
You did earn at the rate of deflation! If you believe the gubmint reports you can buy more stuff now with your savings than you could a year ago. Is that not the same as growth/earnings?
Agreed, no stimulation of lending only another pump for the market at most. I am of the camp that believes that those excess reserves are sterile, they are dead money in money heaven. They represent the write downs that are to come...
It's a given. Even with "mark to fantasy" they are running out of road on the "extend and pretend" highway.
Skumbags. The Politicians and Wall Street are pulling out all the stops to try and re-inflate the debt and housing bubbles. I guess the last little bang wasn't loud enough. They are hoping for an apocalyptic ending so there will be no option but triggering WWIII against the developing world.
"idiot politicians act confused and disgruntled that their corrupt policies have destroyed the country." now doesn't that encapsulate just the whole awful mess. Want to know what's going to end up happening to the US of A? Try your O.T. Book of Amos. You won't like it, but a remant will survive.
Just goes to show, he can create money all he likes (albeit not enough to fill the deflationary hole) but he can't force anyone to borrow or anyone to lend.
I have carried no debt at all since 2002 and plan never to take on even a dime of debt again for the rest of my life.
@HEHEHE: you must be kidding me ! No demand for credit ? Let me borrow 1 billion USD at the NYFED for LIBOR+50bps...
I am speaking on a consumer level.
Banks are not afraid to loan, qualified borrowers can't be found in the amount needed to sustain the equation.
Shoving more food into the fat man only works for so long, then implosion.
http://www.youtube.com/watch?v=MlfcF1I5e_g
But 25 bps is hardly worth the risk... there is still a lot hesitancy to lend because there are still a lot of bad loans on & off the books.
I can go get a jumbo home loan today if I want, I can probably walk in and out there in 10 minutes. Banks don't lend their own credit. My parents got pre-approved for a construction loan in about 15 minutes on the phone the other day, they probably are not going to use it but they wanted to see about options. I know several other people that have had no problems getting mortgages in the last month... AT ALL TIME LOWS.
You ran out of lemmings to support the lie.
I hear you, and I can read that rates have dropped - and you and your parents are a sample size of 3.
The only people and businesses that are in need of lending are the ones who shouldn't get it in the first place. Have we learned nothing. These morons making these decisions are like GS. They should talk it out and make a decision and then do the opposite. Could we have dumber or more crooked people running this show?
The good people have learned that they are unemployed or soon to be and shouldn't borrow money they might not be able to repay.
It's our jack*ss congress who still haven't learned how to do the math.
once that itty bitty little .25% goes away, the mother of all inflation will ignite over night. hello, weimar.
I don't think so - rather than lend the banks will just put the money into "risk free" treasuries.
I'm a small real estate rehabber/investor/landlord (still in business, thanks!) I work with a local bank that was very smart & conservative even during the boom times. These guys are now sitting on a 16% capitalization ratio and calling me asking if I will borrow more money. Their underwriting standards are so high they can't lend to a lot of people and end up parking their excess money into treasuries.
They will still lend to me, but I am afraid to increase my debt/equity ratio since I want to survive the double dip that's on its way! I'm still flipping houses, but it's got to be a killer deal for me to take out the check book.
They're clearly running out of ideas.
That .25% is a maggot subsidy for doing nothing.
Ok I take exception to "idiot politicians act confused and disgruntled that their corrupt policies have destroyed the country."
Here are some videos from 2010 back to 2007 that refute that somewhat:
http://www.youtube.com/watch?v=urkJ2WCQ5R0&feature=player_embedded
http://www.youtube.com/watch?v=dv6rQ0U01Yc
http://www.youtube.com/watch?v=8pEiLHnjAiw&feature=related
And:
http://www.youtube.com/watch?v=w5iNPTTKn3Y&feature=related
Does this mean I can buy me another new iPhone or not?
Please advise, kthx.
"Certainly, the topic of lending to what little is left of America's middle class, will be the primary theme during tomorrow's faux interrogation at which idiot politicians act confused and disgruntled that their corrupt policies have destroyed the country. "
Replace 'idiot' with 'malevolent' and you've got something. The true idiots aren't acting.
Fed trying to push on a string again. In a deflationary economy, safe return of capital trumps yield with risk. Banks still won't be lending. Who and what will be considered immune to deflation will constrain lending, possibly for years.
An Alice-in-Wonderland definition of "free enterprise":
http://www.infowars.com/capitalism-is-not-free-enterprise/
That was funny! And for some reason that remind me of a thing I have read some time ago:
http://www.marxists.org/archive/trotsky/works/1944/1944-fas.htm#p6
This world is so confusing! Everything is so confusing!
I am not a PhD from a respected institution, but this seems logical to me:
Announce rates will go from 0% to 2% within a year. Step the Fed rate higher 50 points every 3 months. You want to inspire lending and spending, you tell people now is the time to buy before rates go higher.
Instead the idiot PhD's tell everyone rates are never going higher which means corporations and people are in no rush to spend.
While I think your idea would spur lending, I don't think it would do much for spending. People are in no rush to spend because they don't know if they'll be getting their next paycheck.
Yep. Spot on.
The only way I'd spend some discretionary money is if I had a no-cut contract. The only people I know who haven't altered their spending habits are tenured professors.
But it's not like it's any hardship for me to live with a 12 year old television and a car with 130K miles on it.
Yeah sure... Torpedo the bond market to get people (who probably can't afford to) borrow and spend more...
That ought to create a mad rush (and another bubble) in risk assets... Ought to be fun while it lasts... It always is, until it's not...
Sure, the under-599 FICO crowd needs a return to the loose lending days. That's a ratio of 1 in 4 membership for that club. The other 3 outside the club are paying down revolving debt with an 18%+ interest handle. Or they are busy re-calculating an underwater house into their 2016 retirement plans ( approaching 1-2 mortgageholders ). The pool of those eager to access lending is restricted to those who need it bad, and they are the ones banks don't want to touch in the new normal world.
And small biz lending ( secured or unsecured ) in a deflationary economy...?? Fuggitaboutit. You better be liquid to cover the note.
The Fed is playing the game to make it appear it is being vigilant about keeping bankster feet to the fire. Really, they are just trying to create the illusion of making the chicken appear before the egg is hatched. And the egg is called the bad debt purge.
And how are we better off for not simply picking 5 survivors and nationalizing them?
Because we are actually already nationalized thanks to the bailouts and that's what got us into this mess. The incentive to offer a good service at a competitive rate while minimizing the risk only exists in a free market.
GFD these economists are STUPID.
I DO NOT WANT MORE DEBT.
I don't want to "SERVICE my debt" like a hooker services her johns.
I don't want to pay more INTEREST to bankers.
You give me free money, i am down, but I don't want something from them I have to repay. Fuck that. They can keep their jew confetti.
Alex, I'll take "Dolts At Work" for $100, please.
In global markets, the...
What are regulators?
(Reuters) - Banks worldwide need to strengthen their balance sheets to stabilize the financial system, senior U.S. regulators said on Tuesday.
I think they're just doing it to force the issue on buying T-bills, there are a few major banks out there that are just sitting on their cash because their .25% borrowing rate is offset by their .25% interest. This action forces that cash into T-bills; they really don't have another option. The reason I suspect this is happening is because the government needs to borrow way more than it currently has to account for FNM/FRM (currently off book, soon to be on book).
at least when they take away the 25 bps.. and credit continues to contract..
the f'ing morons will finally realize what the real problem is.
and it sure f'ing isn't that banks don' thave the money to lend.
I am pretty sure we see nothing but destruction going into the elections. Banks and big biz want the Dems out. The Republicans are for sale and want to be in power. 3/4 of the country's power and wealth wants this economic destruction to make the Dems look bad.
when is that dolt going to realize that it is a demand for credit, not a supply issue. really head-spinning that this idiot has the wheel.
How about FICO score inflation? Give everybody a 100-point boost in their FICO scores and that should bring back some demand.
Most folks who have bad credit and defaulted from job-loss are stuck with that for the next 7 years.
Cut the 25bps? Fine. They will not lend but will keep buying more Greek and other foreign for-crap debt instead.
Just bring back Glass-Steagal and everything will be cool. It's just not that hard.