Cue Panic As Fed Resumes Liquidity Swap Lines, Lends $200 Million To Swiss National Bank, Most Since October 2010

Tyler Durden's picture

If yesterday's news broken by ZH that one bank was in dire need of US dollars and ended up borrowing $500 million from the ECB was enough to send the market down almost 5% today, then the follow up news that the FRBNY just reactivated FX swap lines with Europe will likely send ES limit down at tomorrow's open. The FRBNY has just announced that in the week ended August 17, it lent out $200 million to not the ECB, not the BOE, but the "most stable" of all banks: the SNB. This is the first use of the Fed's Swap Lines since March, and the most transacted under this "last ditch global bailout swap line" (see more on how the Fed bailed out the world using swap lines here) since October 2010. This event also gives us a hint that the European bank in question in dire need of cash is Swiss, which in turn means that it is not some usual PIIGS suspect, but one of the two "big ones." If true, this means that the European insolvency, liquidity and what have you crisis is about to take an exponential step function higher.

From the FRBNY:

And the history of FX swap usage:

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slewie the pi-rat's picture

Commodity Futures Online Trading - Bloomberg

thx, dawg!  this is from the bloomie "commodities for idio-toes" page (attempt paste):

Dow 10,990.60 -419.63 -3.68% S&P 500 1,140.65 -53.24 -4.46% Nasdaq 2,380.43 -131.05

-5.22%

WonderDawg's picture

Thanks for that link, Slewie. I usually have my Ameritrade charts running but didn't have them open after the market close. I glanced at the afterhours numbers on CNN and saw what I posted above, but thinking those numbers were down that much more after the close. I think fyrebird thought I was talking about the closing numbers, as well, but I didn't connect the dots earlier.

I hope you were keeping your head low today, or playing it short. Crazy shit going down.

youngman's picture

That is just Bernanke putting his retirement funds in a safe location....he will soon need them I think

iinthesky's picture

I think its a refund to Hank Paulson for disputed transactions in his name.

Sequitur's picture

Can someone please explain what in the hell this piece of information means. Is a $200MM line meaningful for the SNB?

treemagnet's picture

I just watched a "Rick Steves" travel show on Switzerland.....it looked so idyllic and perfect - of course, it was filmed in like 2005 or something.  Still, mountains, goats, chalets, trams.....AND EVERYBODY HAS A BUNKER!

FubarNation's picture

And their military issue battle rifles.

pods's picture

What I would pay for a nice G3 MBR (yeah, german I know)!

Think that the issue is now a 5.56mm, have to ask my boss.  Call me nostalgic, but I like the old MBRs.

pods

Citxmech's picture

I think they are issued Sig 551s.  Nice rifle. 

Tom_333's picture

Yeah - that one is good. The 7,65 coming out of the long barrel pack a lot of ..uummppf

DosZap's picture

No longer the case.....................PC stuck there.................alas, they are like the rest of the EU disarmed nations.

speconomist's picture

Does this mean that the Swissy is not a safe haven anymore?

 

Or will we get a repatriation of USD around the world back to Switzerland like it happened in 2008 after Lehman with the USD  or like it happened with JPY after Fukushima?

TNT's picture

That's would be one way to devalue CHF

DormRoom's picture

wtf.. did I wake up and it's 2007?

papaswamp's picture

Cover the loss of gold taken by Hugo...

knukles's picture

Gezzzzz.
SNB borrowing dollars form the Fed,
Vennutsuwailia trying to glom onto all their own gold.
Ah... list's too damned long.

World's gone bonkers, bloody bonkers.

fyrebird's picture

Bonkers would have been last year.

What we're seeing now  is the waking up.

People also slept through the first 20 minutes of the Titanic sinking.

FoieGras's picture

Now you know why Swiss 10 year bonds went through the roof today.

Black Forest's picture

Another "secret but leaked" Hildebrand attempt trying to weaken the CHF?

fyrebird's picture

$200M? That's it?

Maybe someone was light for the bar tab. They're good for it.

Roger Knights's picture

If, next week, other banks take advantage of this facility, they'll be able to say, "It's not a sign of our being in trouble, because SNB just did the same, and thy're not in trouble."

Maybe that was the purpose of this loan--to give a cover story to subsequent borrowers.

nonclaim's picture

Just like when GS was "forced" to take a loan so the *other* banks wouldn't look so bad... yeah, we've seen that and we all believed it.

Seasmoke's picture

what do you mean we Spanky ?

Bam_Man's picture

CHF is a "safe haven" only until UBS or Credit Suisse need to be bailed out.

After that, not so much.

Killer the Buzzard's picture

If this doesn't deserve the "Deer in Headlights" picture, I don't know what does.

firstdivision's picture

This is bullish for their cheese, right?

Azannoth's picture

Let's say your currency is on a 1 to 1 gold standard, this means there is a finite amout of it and any1 wanting to purchase your currency would need to trade you gold for it,

that would instantly ground this currency(because no1 could purchase it without having gold to trade), so the Swiss would do best to just 'Peg' the Franc to gold 1to1 and demand gold in exchange for Francs, problem solved

Demand does not matter when you can't pay for what you want to buy

But when the Franc can be freely exchanged for USD and EUR than you have Trillions in demand for Billions in supply and can't stop the flood no matter what you try

The Swiss SNB can't win this  'central bank roulette' they are too small and at best will end up being bichtezz for the bigger central banks

..

For example to buy Oil you need USD because the amount of USD is 'infinite' the price of oil has no upper limit, so the 'value' of oil is determined by the amount of USD

more USD the higher the 'value' of oil, however if the amount of USD was limited (sic.) the 'value' of oil would also have a limit, so putting the Franc on a gold standard

and demanding gold in exchange would put a solid limit on it's 'value', thus 'undervaluing' the franc instead of having it 'overvalued' in the current system

This would be a win-win for the Swiss they would get tons of gold for free and an undervalued currency

DonutBoy's picture

Well - they can - but they'll make enemies.  Anytime someone wants to buy francs, you print them and sell them to 'em.  Unsterilized.  Then take the EUR or USD or whatever they sold you, buy gold, and take delivery of the physical metal.  So - in the net - you turn on your printing press and buy gold.

Now that'll piss-off the other central banks - but at some point you take care of your own country and you just don't care.

Azannoth's picture

This is the 'Simple' logic, you allow them to flood you with their fiat paper so that you can in a few months turn around and buy gold,

but this is closing the barn after the horse escaped, you allow them to import deflation and than after the damage was done you try to make the best of it,

this is exactly the opposite of what I am saying it's a loose-loose, you allow deflation/inflation in the 1st place and than make it worse by 'promissing' to buy gold and make the currency even stronger.

By demanding physical up front you prevent the demand and never import any deflation/inflation to begin with and instead get a steady stream of AU. This system has it's problems ofc to trade with the Swiss you would need to buy gold 1st so that would kill trade too, but not if you implement a 2 tire system,

so if any1 wants to buy from you, you accept whatever he want's to offer you EUR/USD etc. but only the currency trade would be restricted to gold/franc

In a World where everybody wants to screw you (violentyl) it's best to have STD, (gold is like STD to banks), you can't fight paper with paper when you opponent has x100 more of it

..

The Chineese are trying this and loosing 100x of Billions a year, but I  think the Chinesse are trying to implement what I am saying here, when they gather enough gold to satisfy internal

demand they will implement a 2 tire system internal with a limited supply currency and external with a gold backed exchange system, thus combating inflation at home and stopping

the hemorrage on the outside(no more backstoping of budget defitits in USA and Europe)

When China comes out of the closet with this in let's say 5 years the USA won't know what hit them, they have a stable internal currency to insulate them selves from external carnage

and they will smoke the dollar at the same time by dumping USD for anything tagible in the International markets, something they'll already doing 'part time' now

jayman21's picture

Next Up - The Cubs win the world series, holly cow!!!

zebrasquid's picture

Credit Suisse was one of the most aggressive playas in all the loan exotics that are now looking fatal. Likely the limping gazelle about to be thinned from the herd.

Buzz Wired's picture

Tyler, which one do you think, UBS or Credit Suisse?  I'm sure you guys are already digging for answers, but what is your gut feeling?

erik's picture

How about one of the insurers?  Swiss Re?  I don't know if they have access to the SNB or not, but they may be involved in the CDS payout party that is coming when Greece defaults.

speconomist's picture

Tyler, what makes you think that it was the SNB and not another one, the bank that got the $500 mill from the ECB?

John McCloy's picture

Tyler or anyone else ..here is a really important question I would like to know the answer to.

Since we lent out trillions to these banks via the Fed and they repoed back to us God knows what in exchange for our digitized Printocchio dollars...What happens if these Euro banks fail and we are stuck with garbage bags of paper without value?

   Who absorbs that loss..the Fed?

wombats's picture

Oh c'mon now.  I'm sure you know full well that the US tax payer/sucker will be eating that sh1t sandwich.

Caviar Emptor's picture

Fed -China who ever wants to act as lender of last resort

fyrebird's picture

The Fed will spin off a "bad bank" with a junk rating and loan the assets at par, and ZIRP rates.

Problem solved.

tip e. canoe's picture

fyrebird, maybe the FED IS the 'bad bank' already.