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Fed Injects Record $100 Billion Cash Into Foreign Banks Operating In The US In Past Week

Tyler Durden's picture


Those who have been following our exclusive series of the Fed's direct bailout of European banks (here, here, here and here), and, indirectly of Europe, will not be surprised at all to learn that in the week ended February 27, or the week in which Europe went into a however brief tailspin following the shocking defeat of Bersani in the Italian elections, and an even more shocking victory by Berlusconi and Grillo, leading to a political vacuum and a hung parliament, the Fed injected a record $99 billion of excess reserves into foreign banks. As the most recent H.8 statement makes very clear, soared from $836 billion to a near-record $936 billion, or a $99.3 billion reserve "reallocation" in the form of cash - very, very fungible cash - into foreign (read European) banks in one week.

Furthermore, as we first showed, virtually all the "reserves" created by the Fed end up allocated as cash at commercial banks operating in the US: both domestically-chartered (small and large), but more importantly, foreign. And of the $1.884 trillion in very fungible cash parked in various domestic and international US banks, just half of it, or $949 billion is actually allocated to US banks. The other half, or $936 billion, is parked within, again, very fungible cash accounts of foreign (read European) banks operating in the US. This is shown in the chart below (green area is cash of foreign banks), and what is also shown is the total change in the Fed's excess reserves, which proves, once more, that the Fed continues to fund European banks with hundreds of billions in cash on a week by week basis. And what is perhaps most important, is that of the $250 billion in new reserves created under QEternity, all of it has gone to foreign (read European) banks.

It may anger American to learn that by the time the Fed is done with QEternity (if ever), all of the newly created cash will have gone to mostly European banks. Because with every passing week, whatever new reserves are created by the Fed in exchange for monetizing the US deficit, end up as cash solely at European banks: a sad reality we have seen non-stop since the advent of QE2 when US bank cash balances remained relatively flat in the ~$800 billion range, and every incremental dollar went straight to Europe.

As a reminder, we don't know how, via assorted shadow banking and other repo pathways, these banks manage to use said cash in other fungible activities. Recall that as we said, "So whether European banks will continue buying the EURUSD, or redirect their Fed-cash into purchasing the ES outright, or invest in other even riskier assets, remains unknown." It is also unknown is the Fed's reserves, reappearing as cash, and then siphoned over to European bank HoldCo via payables, is then used by, say, Italian and Spanish banks to purchase BTPs and Bonos, and give the impression that all is well. Because unlike before, keeping the EURUSD high is not as critical any more. But what is critical is to give the impression that Italian and Spanish sovereign risk is contained. And after all, let's not forget that as of January, Italian bank holdings of Italy state bonds just hit a record of EUR200 billion.

Is it possible that the Fed, in all its generosity, transferred over several hundred billion over to these same Italian banks, courtesy of the cover provided by QE, so that the same Italian banks may monetize Italian bank bonds? And the same for Spain. Any wonder then that we got news of how flyingly great Spanish and Italian bond auction were in the past week?

After all, in Europe Germany has a heart attack whenever anyone perceives the ECB as monetizing, or even greenlighting the monetization of local sovereign bonds. But Germany has never said what it thinks about the Fed, indirectly, doing the same, using Italian and Spanish banks as conduits.

Finally, while we don't know what the cash is being used for, we know that sooner or later, sometime around December 2013, when European, pardon, foreign bank holdings of US reserves, i.e., USD cash, hits well over $1.5 trillion, and when the Interest on Excess Reserves starts going up and the Fed is directly providing tens of billions in interest payment to European banks, some Americans may be angry to quite angry with that development.

But for now, everyone is blissfully unaware and even if they were, nobody cares. Why just look at the Dow Jones Industrial Average: how can one possibly allege that all is not well with the world...

Source: H.8

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Sat, 03/09/2013 - 12:00 | 3314820 Volaille de Bresse
Volaille de Bresse's picture

Thanks Merci Danke Gracias Grazie etc etc to Ben the U.S. masterprinter! :-)))

Sat, 03/09/2013 - 12:01 | 3314825 MrX
MrX's picture

no honour amongst thieves: http://vimeo.com/31304149

Sat, 03/09/2013 - 12:35 | 3314895 true brain
true brain's picture

"Why don't you change all that money into nickels and shove them up your ass?"

                              Ernest Hemingway once said to a hollywood agent. Hemingway would say the same to Bernanke if he were alive.



Sat, 03/09/2013 - 12:41 | 3314911 kaiserhoff
kaiserhoff's picture

The most essential gift for a writer, is a built-in, shock proof, bull shit detector.


Sat, 03/09/2013 - 12:47 | 3314927 Manthong
Manthong's picture

“we don't know how... these banks manage to use said cash in other fungible activities "

Hmm.. executive compensation, bonuses, lobbying and political contributions comes to mind.

Sat, 03/09/2013 - 14:06 | 3315071 Cdad
Cdad's picture

Absolutely correct on "executive compensation."  Insider sell/buy ratio just hit 50:1, just as we top out on corporate buybacks.  For all those who use the ever rising tick of the S&P [ie the market is always right] to figure out its value...you might want to calculate just how much of the value of the biggest 500 companies has been hollowed out by this practice.

But this, in the end, is just one side note.  The larger crime is the one charted above, whereby US dollars are printed and given to foreign banks...as yet another bailout, of course.  I'd say it is a bitch to be a member of the banking oligarch, trying to float this turd as the global economy collapses....however, Ben Bernanke is making it all very easy and comfortable for them, indeed.

Anyone want to finally End the Fed?

Sat, 03/09/2013 - 14:11 | 3315084 Thomas
Thomas's picture

The US Federal Reserve does not support the US, is not Federal, and is not public. It is a global banking cartel supporting the global banking system. If it becomes necessary to throw the US under the bus, we will be looking at nothing but axels and exhaust pipes so fast we won't know what hit us. If I really expressed my views, I would be scooped up by Homeland Security and carted away.

Sat, 03/09/2013 - 14:35 | 3315168 Chupacabra-322
Chupacabra-322's picture

I've coined term to describe the Criminals as:

Global Criminal Cabal Crime Syndicate. 

Sat, 03/09/2013 - 18:39 | 3315749 .25hors
.25hors's picture

Global Criminal Cabal Crime Syndicate

at evidently such great risk to yourself . . .  how brave


naming names

Sat, 03/09/2013 - 19:09 | 3315806 Chupacabra-322
Chupacabra-322's picture

And I say onto them.  Come and get some.  I'm tired of waiting. 

Sat, 03/09/2013 - 19:27 | 3315838 Dugald
Dugald's picture

Get off your arse....go forth and meet them!!

Bumming your chat won't get it done...

Sat, 03/09/2013 - 14:35 | 3315174 I am more equal...
I am more equal than others's picture

Some one needs to inject 100 billion penises up bernake's ass because he ultra-ubber-fucked us with his dwarf penile implant. The little jackhammer of liquidity.

Sat, 03/09/2013 - 17:11 | 3315579 ebworthen
ebworthen's picture

The FED is TREASONOUS, it is TREASON what they do, therefore - EXECUTION or life in prison for the perpetrators is warranted.

Sat, 03/09/2013 - 18:39 | 3315750 chumbawamba
chumbawamba's picture

Yeah, whatever.  How many assholes reading this still have accounts with Chase, Wells Fargo, Bank of America, Citibank, etc.?  Count them amongst the enemies of the people as well, dirtbags and scallywags, the whole lot of them.

I am Chumbawamba.

Sat, 03/09/2013 - 22:57 | 3316223 archon
archon's picture

Well, I would like to hear what you really think!

BTW, this may be the right place to mention that John Williams has recently released an update where he discusses the US government's solvency crisis, and hold the line on his prediction that hyperinflation in the US is pretty much inevitable at this point.


Here's a snippet:

"There is no political will apparent among those currently controlling the White House and Congress to do so.  Accordingly, the United States will be doomed to an eventual hyperinflation, as the government prints money to meet its obligations, a process that already has started.  There is little time to restore balance to the system, as discussed in No. 485: Special Commentary."


Sat, 03/09/2013 - 23:56 | 3316301 smlbizman
smlbizman's picture

project mayhem sir.

Sat, 03/09/2013 - 16:45 | 3315520 monkeyshine
monkeyshine's picture

Is the US Fed getting some convertible bonds for The New Mar$ha££ P£an.

Sat, 03/09/2013 - 17:31 | 3315632 GoldForCash
GoldForCash's picture

And Kickbacks to Obamas offshore accounts....

Sat, 03/09/2013 - 20:14 | 3315919 NoClueSneaker
NoClueSneaker's picture

... coke & hookers ... - simplified ...

Sat, 03/09/2013 - 21:00 | 3315994 Coke and Hookers
Coke and Hookers's picture


Sat, 03/09/2013 - 12:48 | 3314929 true brain
true brain's picture

Writers with integrity like Hemingway are not found anymore. I don't see living writers today calling out the banksters, corrupt government, fraudulent Fed (correct me if I'm wrong, give me some examples.). Going against establishment will mean falling off Oprah's reading list. How pathetic.

Sat, 03/09/2013 - 13:33 | 3315006 Antifederalist
Antifederalist's picture

Taibbi, Greenwald,Paul Craig Roberts, Hedges.

All trying, imperfect, yes, but trying.

Sat, 03/09/2013 - 15:16 | 3315309 disabledvet
disabledvet's picture

you forgot me actually. http://www.youtube.com/watch?v=Y1D3a5eDJIs
truly an outstanding video. saw Petty who was headlining with the Allman Bros not that long ago...gotta say that guy can still ROCK. lotta fun. here's a live version:
and if you want to know who "Del" is he was singing to in his car that would be this guy
Del Shannon. and i'm far from imperfect....just like these two guys.

Sat, 03/09/2013 - 20:09 | 3315906 Lost Word
Lost Word's picture

Probably meant well known popular novelists such as Dan Brown.

Sat, 03/09/2013 - 22:52 | 3316224 Pseudo Anonym
Pseudo Anonym's picture


Taibbi, Greenwald,Paul Craig Roberts, Hedges

will be perfect right after they die.  not before.

Sun, 03/10/2013 - 05:44 | 3316543 putaipan
putaipan's picture


Sat, 03/09/2013 - 14:20 | 3315118 Cdad
Cdad's picture

Robert Wenzel's concluding remarks in his address to the NY Fed:

Let’s have one good meal here. Let’s make it a feast. Then I ask you, I plead with you, I beg you all, walk out of here with me, never to come back. It’s the moral and ethical thing to do. Nothing good goes on in this place. Let’s lock the doors and leave the building to the spiders, moths and four-legged rats.

Sat, 03/09/2013 - 14:56 | 3315234 GMadScientist
GMadScientist's picture

Please do follow his model for retirement.

Sat, 03/09/2013 - 21:26 | 3316048 scrappy
scrappy's picture

True, that time was a special time for a special breed, "the lost" who see near, far, and THROUGH.

It's just happening differently this time, the media is in flux.

Though not any where like Hemmingway, I offer these contemporary titles.

You can read these books online for free, "a gift".

You will get what the "gift" means after you read them.














Sat, 03/09/2013 - 13:33 | 3315004 SandiaMan
SandiaMan's picture

Nickels are actually worth something

Sat, 03/09/2013 - 13:57 | 3315053 tiger7905
tiger7905's picture

Jim Rickards 8 min clip on currency wars, for those that don't want to read the book.





Sat, 03/09/2013 - 21:08 | 3315766 El Oregonian
El Oregonian's picture

Given that Benny Boy LOVES spreading it around and has become VERY LOOSE with our money. That ass has become SO large that Nickles won't work. Eisenhower silver dollars might even be just a bit too small...

Sat, 03/09/2013 - 12:02 | 3314826 Dr Paul Krugman
Dr Paul Krugman's picture

What would you have the Fed do?  Reject requests for needed liquidity?  Shall we nosedive back into a global depression?  Is that what everyone wants?

Sat, 03/09/2013 - 12:06 | 3314833 dick cheneys ghost
dick cheneys ghost's picture

YES......But Only if it means the end of the FRN, the end of the US dollar as reserve currency and the end of the 'petro dollar'..............Bring it on........Lets see how exceptional America is without these these constructs..........


(ps..I think we will be ok)

Sat, 03/09/2013 - 16:37 | 3315365 sunaJ
sunaJ's picture

I thought at the time (now sadder and wiser) that the Fed did the correct thing in granting needed liquidity in 2008; HOWEVER, where we are today - the way in which "liquidity" was secreted, given away, the way it was used and the way in which nothing has changed except that now all the government assets are equally and fully corrupted - where nothing has gotten better, nobody went to jail, the way of doing business is the same and now we are injecting this liquidity with increasing rapidity - tells us something very obvious...

The authority and power to drive and react to this crisis is derived from the Fed.  It is the job of elected leaders only to sell to us what the Fed does, apparently.  They have appointed a DoJ head that provides carte blanche immunity for the inner-circle and uses the reins of justice to neutralize those that would threaten their way of doing business.  Why is the Fed not screaming for "reform" of the system?  Because they can't be honest about how bad it is and frankly, they don't care.  They can create as much money as the finance industry (their industry) needs and when there are consequences there is always war and scapegoating.  It has nothing to do with what people want or what they are being told.


Your system is dying of corruption, Dr. Krugman, so speaking about more or less liquidity has the unfortunate quality of being both moot and boring.

Sat, 03/09/2013 - 16:55 | 3315543 disabledvet
disabledvet's picture

if we're talking war "it's neither moot nor boring." i think it is possible to have both the Austrians and Keynesians be right here. neither Austria nor Britain had the US dollar...though they both sure wanted it. when these two schools of thought were operating the dollar is behaving very much as it is today...probably the first time since then actually. this is an ALMIGHTY dollar...backed by NOTHING but what is written on it namley "faith and credit." in other words "if the US defaults she still gets to keep her gold" along with an ENORMITY of other assets. again...not saying "go hog wild and buy Google" here. i'm only saying "keep your cash flow clear a Government check might be coming soon." shall see of course. if Dennis Rodman is your point man for negotiations to prevent a war http://www.spike.com/articles/x20c6y/the-curious-case-of-the-carmen-elec...

Sat, 03/09/2013 - 17:01 | 3315560 Chupacabra-322
Chupacabra-322's picture

@ sunaJ,

There's that C word being misused again.  It's not corruption, we're way past that point.  It's CRIMINALLY Corrupted. 

Mass arrest followed by RICO and debt forgiveness to all nations.  Treasonist's will be held accountable and Executed. 

Sat, 03/09/2013 - 17:41 | 3315653 Go Tribe
Go Tribe's picture

Great post. 100 arrows up. It.'s about fixing the system, not preserving the status quo. The troll with the gamer tag Krugman just got ass raped by a real thinker.

Sat, 03/09/2013 - 19:26 | 3315837 Xibalba
Xibalba's picture

answer, buy gold

Sat, 03/09/2013 - 12:10 | 3314848 fonzannoon
fonzannoon's picture

That is not the question Paulie, as the fed has made it clear they are going to meet those liquidity needs. I am more interested in the consequences of going down that path.

Sat, 03/09/2013 - 12:39 | 3314910 Orly
Orly's picture

Spoiler Alert:  It doesn't end well.


Sat, 03/09/2013 - 12:49 | 3314931 fonzannoon
fonzannoon's picture

Agreed, the fact that they know it and still choose that route means the other route really does not end well.

Sat, 03/09/2013 - 15:01 | 3315247 GMadScientist
GMadScientist's picture

It takes a special kind of asshole to insist that his previous poor decision making is now justification for present poor decision making.


Sat, 03/09/2013 - 15:10 | 3315288 gould's fisker
gould's fisker's picture

GMad there's alot of that going around, it's called rational thought and analysis nowadays.

Sat, 03/09/2013 - 12:16 | 3314859 caimen garou
caimen garou's picture

hell yes you bearded idiot, how about saving the US TAPAYER instead of europe!  and why you don't just go to europe and give your stupid advice to them!  by the way paul, does shit stick to that beard of yours?

Sat, 03/09/2013 - 20:24 | 3315941 NoClueSneaker
NoClueSneaker's picture

... hmmm .... dunno, Tylers & Reggie say : short the shit out of €U-Banks who r on the tit of the Feds . GS made EMU to loot ...

Does s1 know who sucked those Bns. ? If BNParisBus, Unicredit, Intensa San Paolo, SocieteDegeneree ... than safe while broke. If Barclays, Deutsche, HSBC - SHTF ....

NWO Kaliphat of Bankrrupcy has a plan ... we just to dumb to dig it.

Let's dig the graves for the banksters - preemptive ...



Sat, 03/09/2013 - 12:19 | 3314867 gould's fisker
gould's fisker's picture

Dr Doom, there is an alternative.  The Europeans can revert to their own national currencies, admit the Union was a bad impression of a Fellini film, and they can proceed to print, debase their own currencies, and collapse in ten years rather than next year.  We've got plenty of choom printing velocity over here in the USA and can collapse on our own, we don't need the Europeans on our collective back.

Sat, 03/09/2013 - 13:51 | 3315039 max2205
max2205's picture

Do they have to pay it back

Sat, 03/09/2013 - 15:06 | 3315266 gould's fisker
gould's fisker's picture

Don't be silly, how can anyone pay back this enormous mound of steaming debt paper? They're probably planning a "do-over" this very minute. And heh, you never know where the next currency is coming from--beads, casino chips, bitcoins, or maybe this:


Sat, 03/09/2013 - 16:57 | 3315550 disabledvet
disabledvet's picture

you bet they do...

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