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Stocks Stumble On $200bn Liquidity Shortfall From Fed's Tougher-Than-Expected Bank Rules
In a tougher-than-expected proposal, the Fed has decided that "internationally active banks" raise their minimum liquidity standards (more than some expected, it would seem by the reaction in stocks).
- *FED PROPOSAL CALLS FOR BANKS TO HOLD 30 DAYS OF READY ASSETS
- *FED: US BANKS ROUGHLY $200 BILLION SHORT OF PROPOSED LIQUIDITY REQUIREMENT.
- *BERNANKE SAYS LIQUIDITY RULE WILL MAKE FINANCIAL SYSTEM `SAFER'
The Fed seeks comments on this proposal over the next 90 days - which we presume will involve much hand-wringing and jawboning until the shortfall disappears magically with transformed collateral... but for now, it is yet another 'tightening' stance in global policy that will impact 'trading' banks considerably more than 'deposit-taking' banks.
Via Bloomberg,
Banks would have to hold enough easy-to-sell assets to survive a 30-day credit drought under a rule to be proposed today by the Federal Reserve that may have the greatest effect on banks with big trading operations such as JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS)
The demand for 30 days of liquidity is intended to satisfy global Basel III accords for strengthening the financial system. Increasing the banks’ liquid assets is meant to make them less vulnerable in a crisis like the one that struck in 2008.
...
“It’s always been viewed as something that had more relevance for the trading banks,” said former Fed lawyer William Sweet, adding that it will hit them harder because of their more urgent need for short-term funding. Banks’ broker-dealer units must raise money in the market because they can’t rely on deposits to finance their activities.
...
“The implementation by the U.S. of the Basel rules have had more rigorous requirements than those implemented elsewhere,"
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The liquidity coverage ratio was at the center of an international tussle last year, as some central bankers and regulators warned that a draft version of the standard risked causing a credit crunch, while others urged against a wholesale watering down of the measure.
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The inherit nature of fractional reserve banking makes this impossible.
**BERNANKE SEES NO CONFLICT OF INTEREST IN BANK-OWNED FED RESPONSIBLE FOR REGULATING AND SUPERVISING THESE VERY SAME BANKS
Why would there be? It's only evidence that there are no independent banks, just extensions of the same enterprise. As soon as that's accepted it becomes painfully clear that there is no 'safe' place because it's the same beast.
Keeping in mind most of the G20 is grafted to the body of the beast. That's the situation, it's pretty bad.
Look for Goldman Sachs and Morgan Stanley to start floating the idea of giving up their bank charters, so they can return to being less regulated casinos.
Correct. They will become banks again when they need another bailout.
Same as it ever was.
What Bernanke left out of his statements:
Bernanke to banks: "Here take $400Billion each, that ought to cover you for 180 days... You are right about the smell, these bills are fresh off the press"
Ben can easily land his own parachute in 180 days
They wouldn't be able to unfortunately and who cares what the sock puppets would want to do. They are in the monkey trap with the rest of them.
The FASB meetings in 2008 certified the Fed's ownership of the entire banking industry in the Western world in North America and parts of Europe. Then the central bank 'merger' came in 2010 when they glued all the Central banks together controlled by the central head of ALL central banks. Which is the NYC Fed.
http://www.zerohedge.com/article/meet-35-foreign-banks-got-bailed-out-fe...
Everything around the world should have been flushed twice in the Banking industry. It was unfortunately kept alive and spread like a disease. The Fed OWNS all of Europe and calls every shot there. Every shot. Everyone best understand that.
There is only one bank. The US Federal Reserve. There is no other. Not anymore.
... paging Basel, your bastard step child is stealing your thunder.
Watch it...this means bringing back 200 billion non leveraged dollars from X14 leveraged positions or 2.8 trillion in wind downs...is bernake stupid he should just end QE period
So, just how liquid is gold? Maybe the big banks should be buying gold with this additional $200B they raise. That would give the Fed a fine "fuck you."
Translation: THE SHIT IS ABOUT TO HIT THE PROP !
Yup. Options are going to go berserk.
Bernanke is sticking his little peter in the hole in the dike. Hot dog in the hallway. This bitch has been fucked so hard for so long, nothing is going to keep her innards in her.
DOW 'stumbled' up only +100 points? Damn, it's gonna be wild when a +500 DOW day is considered a bummer day.
Ctrl-P is the "liquidty rule'
"BERNANKE SAYS LIQUIDITY RULE WILL MAKE FINANCIAL SYSTEM `SAFER'"
All together now, Hedgers. FUCK BERNANKE!
Nothing makes ass raping "safer".
BERNANKE SAYS LIQUIDITY RULE WILL MAKE FINANCIAL SYSTEM `SAFER'
I'd rather go back to the Glass-Steagall days.
Funny how all the modern financial problems can be traced to that time in the late 80's & early 90's when the banks all conspired to weaken, then eventually kill Glass-Steagall in the late 90's. S&L meltdown, DOT.COM bust, Housing Bubble, Great Recession, etc. One boom/bust crisis after another. Just like the bankers engineered it. The banks and TPTB get richer, and the people get poorer.
And although everyone has been conditioned now to believe it can never happen again, I suspect the next 'bust' part is coming pretty soon.
The Lie is "it can never happen again." The truth is it is being engineered to happen again to benefit TPTB at the expense of the masses. Wealth Redistribution 1% style.
edit - I didn't down vote you sheep dog. Don't know why anyone would.
Does someone think that banks might need a few weeks of reserves? Thats interesting. And they want them in "easy to sell assets." Do these rules have any kind of rules for planning the value of these assets? I mean, if everyone is selling "easy to sell" assets, one might imagine that the price of these assets would decline pretty quickly.
Is that the sound of a domino tipping that I hear?
Bingo.
Only in a really deep market might such sales have a minimal effect on prices (and then only under certain circumstances). One market that COULD potentially qualify as really deep is the T-Bill market. If true, could this really then be a sop to prop Uncle Sam's ST funding needs? Probably not, but worth pondering just the same.
Is it just me wrapped in tin foil, or is this 90 day pushout thingy getting to be a habit ? < when Bernank is gone, by coincidence >
He's got to leave a dookie in the bowl for the next resident of the Fed.
I thought the fed was the dookie in the bowl.
Not a dookie in the toilet bowl....he's leaving an upper decker huge steamer.
Central banks can "fix" any liquidity problems in micro seconds by "creating" credits from thin air.
Unfortunately, a calorie shortage is another problem altogether...
Roll the motherfucking guillotines already...
nothing changes otherwise...
Off topic....but
Remember that fat fuck who peppered spray the Occupy Wall Street students..........
He's been award 38,000 for.....get this.....psychiatric damages.....REALLY !!!?????????
http://usnews.nbcnews.com/_news/2013/10/23/21105239-university-of-califo...
That isn't the most disturbing part. He makes 119K a year as a campus cop. The theft appears to have begun long before that 35K ruling.
What a fucked up country we live in. Every damn thing always comes down to money.
all this bullish news this AM. if ben doesnt have to ammo for adding another $50B to his monthly printing, i'm sure he soon will. maybe the US will get lucky and have a terroist attack on US soil or a massive natural disaster. anything that gives ben cover to print more is extremely good news.....for the wealthy.
Liquidity requirements ... Deja Vu ... is this 2008?
Stocks stumble up.
Stawks stumble...upwards?
'Twas not even a flesh wound! Onward to S&P 2000!
An open letter to the owners of the Federal Reserve Bank and their servants in politics and media.
I am not your enemy. I am just a sad old man. I am often tormented by fear and anxiety. I can see death coming for me soon as it will for us all. I have a few things to say that could be meaningful to you. The Fed has been stealing the fruits of my families labor for three generations. The Fed stole from by grandfathers. The Fed stole from my father and now it steals from me. There may have been a time when they provided some worthwhile service for the money. That time has long past. Now they spend my tax money to make billionaires richer. Now they spend my money to spy on me and my fellow citizens. Now they spend my money on drones to kill innocent women and children. Now they spend my money to prop up an empire built on lies, usury, and violence. Please stop. Just stop.
Look what you are doing. Do you think you can hide behind lies and be protected? Only truth can set you free. Do you think you can pile wealth up to the sky? When you die the only pile you will take with you is a pile of bad karma. Do you think your paranoia and violence will protect you from your enemies? Aggression only makes more enemies. They way to overcome enemies is with compassion and mercy. It is not too late to repent of your folly. You can still be of benefit to mankind and to yourself but you must stop.
Stop the lies. Stop the usury. Stop the violence.
Do you really think this open letter will make a difference to people who wipe their ass with the Constitution, which is the foundation of our nations' freedoms and laws? I'd +1 you for optimism, but at the same time, I'd have to -1 you for naivete. The only mechanism that will stop the lies, usury, and violence is revolution. Be it by unplugging from the financial network and starving the beast, or by turning off the TV and starving the ratings beast (and thus the advertising beast), or by picking up weapons and fighting violence with violence, revolution is the only ending to this fairy tale. We are way too far past the point of no return for rational pleas to make the slightest bit of difference. A rational, heartfelt plea to your slave masters is only slightly less futile than a sternly worded letter from a lawyer asking The Pirate Bay to stop enabling the downloading of copyrighted material.
I accept that my words may very well be futile. But who knows? The Grinch's heart grew 3 sizes in one day. And we all know truth is stranger than fiction.
Sounds like SIFIs can expect about $200B from the Fed for X-mas this year.
"At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credi...t and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy."
http://www.imf.org/external/pubs/cat/longres.aspx?sk=26178.0
This morning's haiku:
Stop your wondering
Yellen drops a deuce in john
There is your taper
Sum1 needs to wake Ben up and remind him House Prices and Stocks Prices NEVER drop.
Perhaps J.P. Morgan knew this was coming and is why they are holding money hostage here in the U.S. (limiting international transfers)?
Everything is fine with the 5 yo recovery, except the bankers are still panicking behind the scenes and the country is being stealth militarized and conditioned for martial law. Thanks to our central planners 300 million oblivious people will be completely blindsided by the 1%.
How are they supposed buy stocks if they have to allocate money for liquidity? Especially in a market where the anyway the Bank Cartel can beat earnings is via faking it with the 4 year process now of releasing reserves that were intended to be set aside for all these awesome writedowns coming when the ponzi implodes again.
They know this plate spinning is going to eventually lead to a Peter Pan in stocks worse than 2008...So how are they are going to raise reserves than? Only thing I can come up with is an equity offering..or dilution.
How are they supposed to buy stocks? It's a $200B liquidity shortfall... the Fed is throwing $85B / mth into the market...3 months and all is well?
The Fed knows a correction is coming. Hell, they engineered it. Why else did they run with the QE tapering, then NoQE-Tapering fiasco? With the 0zer0care disaster, consumers are waking up to the fact that HC is going to be A LOT more $ then any of the sheep thought. All in time for the holiday season. Goodbye recovery that never was, and hello recession. 1st QTR will be the tell, and there will be no way to spin it. 0zer0 will blame the Repugs and the shutdown, and most sheep will buy it. This will force the Repugs to cave on the debt ceiling and budget again, so the Fed can just continue to monetize the debt. This capital reserve requirement is just a signal to the weakest banks to doctor your books so you don't go Lehman when the SHTF. Can't risk another TARP this time, too much anger from the masses if another TBTF Bank Bailout happens again while they are getting shafted on 0zer0care and another recession. So we get another Stimulus plan from the govt. Rinse and Repeat. It's 2008/2009 all over again. Just like 1999/2000/2001. The stock market is stuck in this perpetual boom/bust cycle to maintain the illusion that TPTB are doing something beneficial. It's the only thing they have to control the sheep, and fleece them at the same time.
I'm watching the Fed Open Board Meeting. Someone correct me if I'm wrong, but I thought I heard them say these new Basel III rules proposed would expand the definition of HQLA(High Quality Liquid Assets), to include 'limited' equities.
So all the QE this year pumping the markets has merely been the banks adding HQLA under the new Basel III rules? Recapitalizing by buying equities? New normal?
What am I misunderstanding?
Yes, that and continuing "mark to fantasy" rules on all real estate and MBS holding, plus the ability to write down bad bets...
etc... etc...
As jaded as I already am, it's still unbelievable.
Just listening to these people makes me despise them.
Almost right they are shifting from one fungible HQC to another in a 3 step process if I see this correctly.
1. HQC 1 Government Bonds: Treasury issues bonds -> FED auctions them -> PD banks buy them
2. HQC 2 Cash: Banks get cash from FED in return for bonds
3. HQC 3 Equities: Invest cash in market
Someone can fill in the where and how they leverage it. My guess is the increase at least numerically as far as HQC on the books goes is the value of said equities minus initial cash invested. But as we all know that is not HQC and risky in and of itself unless the market is rigged so it won't go down hence making it High Quality as opposed to Medium or Low Collateral since the level should be proportional to the risk based on a time parameter criteria while holding it.
In a morbid market with low volatility being propped up by cheap easy money you can't pull your profit aka cheap easy money out of the market without tanking it which would undo and invalidate all their monetary policy. They have no choice but to include equities as HQC. It is a self referential QE Hotel California roach motel feedback loop in action. It's sole purpose is to keep Benny the Bozo from looking like a fool since he is deathly afraid of a stock market crash killing all his credibility about claiming to be an expert on the Great Depression and being able to avert it with loose money policy. It is nothing more than him trying to jam a fat finger to plug a hole in dam called the Stock Market to keep it from leaking. The other advantage it allows the PD banks to harness that non-existant monetary inflation to prop up their books. Remember 85B a month and there is no inflation. That fucking money is going somewhere........ This nothing more than a cheap accounting trick to inflate away their debt while leaving everyone else holding the bag.
The new money is going to the investment banks who have been inflating the stock market. It is also being loaned at very low rates to other corporations so they can buy back their own stock and increase stock prices some more, thereby inflating also their executives' bonuses.
The liquidity requirements of Basel III, if applied correctly to those investment banks that switched to deposit institutions in a hurry to qualify for bailouts, will put a necessary crimp into their stock market manipulation. However, a real solution would be to re-install the wall between investment and deposit banking, as required by Glass-Steagell, and prohibit depository institutions from trading stocks with insured depositors money. Going back further, the shadow banking institutions like money-market funds were started up to offer unfair competition to depository banks by avoiding reserve requirements and other regulatory limitations. These should have been prohibited from the get-go as institutions that offered banking services while not subjecting themselves to bank regulations.
What will the penalty be for non-compliance? As long as the Fed and the US Government are willing to step in at a moment's notice to bail-out these banks in a credit crisis, the banks will continue to act with total disregard to the not-so-tail risk.
so should i be dusting off my dow 10,000 hat or buying a dow 30,000 hat?
Every $1 you take out today, is $9 more that Jamie, Brian and John have to come up with tomorrow.
S&P action == muppet milking
Must be a combination of 700 trillion in derivatives and "WHOOPS"-hey you guys can't give that much money to Europe's insolvent banks?Can you?
Answer:We had to stall,no matter what the cost.But it's not working out as planned.When are we going to allow the plug to be pulled to bring about the 40% market correction?Sooner or later?
Solution:Michael Seery on Inside Futures,Silver is the one to watch!
Mark to fantasy accounting for the banks and the Fed is still valid. What's the problem?
Not much talk about the near 1.40 Euro? How is this NOT double-tapping Spain, Portugal, Italy, Greece! Is the Euro strength indicating that China is choosing its final "dance partner"?
How's that going to work out for the EZ exporters again?
1.40 Euro is a "tell" that the Fed is printing and lending/swapping to the ECB to liquify their banks. Eutrpean banks know this... so who wants to buy USD that is being printed at $85B / mth?
If dollars are being swapped, then you are essentially printing Euros.
I have 30 days of strawberry preserves, I'm in good shape.
A pre-emptive excuse for MOAR QE .... "have to ensure banks have sufficient liquidity to weather any storm, so asset purchases will be increasing to $120 Bn per month" - Janet Felon
I thought the US was fighting the Basel rules? Now we do a tougher version of it? Something not right.
If you asked me,
do away with any fractional lending,
do away with mark to fantasy accounting,
do away with packaging and selling mortgages to external entities,
separate basic banking from bankstering
I don't care if revenue plummets; it is mostly gambling revenue anyway and the US taxpayer is guarantying it...
OR stop the taxpayer guarantee!! Caveat depositor.
Coming wave of forclosures in 3rd tier cities?