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Foreign Currency Liquidity Swaps (aka Global Bail Out Plan B) FAQs

Tyler Durden's picture




 

Those wondering about the global Fed bailout (this is not the first time, recall How The Federal Reserve Bailed Out The World) can read the FAQ from none other than the source of the global liquidity tsunami itself.

Frequently Asked Questions: Foreign Currency Liquidity Swaps

What is the purpose of the foreign currency liquidity swap lines?

The foreign currency liquidity swap lines are designed to provide the Federal Reserve with the capacity to offer liquidity in foreign currencies to U.S. financial institutions should the Federal Reserve judge that such actions are appropriate.

Which central banks are participating in these arrangements?

The Federal Open Market Committee has authorized arrangements between the Federal Reserve and the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. In addition, these foreign central banks are also establishing bilateral swap arrangements with one another.

Why are these swap lines being implemented?

These swap lines are being implemented as a contingency measure, so that central banks can offer liquidity in foreign currencies if market conditions warrant such actions. These lines provide the Federal Reserve with the same ability to provide foreign currency, should the need arise, as foreign central banks currently have through the existing dollar swap lines with the Federal Reserve to provide dollar liquidity in their jurisdictions.

Why is the Federal Reserve establishing lines for these five currencies and with these five central banks?

These five currencies are used globally and account for the bulk of the foreign currency funding of U.S. financial institutions.

In what manner would foreign currency liquidity be provided?

There has not been a decision to activate the foreign currency liquidity facilities. If the Federal Reserve were to decide to offer liquidity in foreign currencies to U.S. financial institutions, the details of the operations would be determined at that time in light of the prevailing circumstances.

Will activity under the liquidity swap arrangements be disclosed to the public?

Yes, the aggregate swap activity in each currency with foreign central banks will be published weekly. They will be found on the Federal Reserve Bank of New York’s Foreign Exchange Swap Agreement webpage Leaving the Board. In addition, any liquidity-supplying operations in foreign currencies would be subject to the same disclosure requirements as the Federal Reserve’s dollar-based activities.

For how long are the swap arrangements expected to be in place?

These swap arrangements, along with the existing U.S. dollar swap arrangements, have been authorized through February 1, 2013.

 

 

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Wed, 11/30/2011 - 10:17 | 1929721 GeneMarchbanks
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'These swap arrangements, along with the existing U.S. dollar swap arrangements, have been authorized through February 1, 2013.'

So right around the time ZIRP is supposed to end. Riiigghhht.

Looking forward to it.

Wed, 11/30/2011 - 10:27 | 1929782 HedgeAccordingly
HedgeAccordingly's picture

well.. F it.. check out some tots - screw trading - http://hedge.ly/gFWVSm -- its all fake anhyway 

Wed, 11/30/2011 - 10:36 | 1929823 CPL
CPL's picture

Feeling that way myself.

 

Fuck these pricks.

Wed, 11/30/2011 - 10:30 | 1929790 Pladizow
Pladizow's picture

The Fed could'nt care less about Europe, this is being done to save US banks, particulary - Bank of America's ass.

No way would a $4 handle be allowed.

BOA goes down and all the CDS Merrill wrote goes with it.

Game over - bond market implodes.

Wed, 11/30/2011 - 10:45 | 1929859 Sean7k
Sean7k's picture

Don't forget the JPM stock price silver price relationship. The banks have all been reducing reserves to show profits. Interest rates on bonds in Europe. All the birds are coming home to roost. CDS, Derivatives. Through 2013? 

Western world Weimar and China wants to buy euro infrastructure. Dumping dollars and euros to do it no doubt. 

Fun, Fun, Fun!

Wed, 11/30/2011 - 10:51 | 1929887 Manthong
Manthong's picture

Isn't it interesting that nobody ever hears about the Chief of Staff in the White House anymore?

I  hear he has spent a lot of time in New York lately.

Maybe they're getting ready to move Wall Street to Chicago.

Wed, 11/30/2011 - 10:35 | 1929819 CPL
CPL's picture

The fucking idiots just broke it all.

 

WTI well over a $100, this is going to end very badly.  Very badly.

 

Wed, 11/30/2011 - 10:42 | 1929841 vast-dom
vast-dom's picture

taxpayers and any sane economists, policy makers (if there are any decent one's left anywhere) would all never ever approve this illegal market manipulation. and what exactly are these banks doing since they are no longer performing basic banking functions nor is the saver offered any interest -- perhaps TeH FeD may want to manipulate up interest rates (if Bernank gave a fuck about the saver ie US taxpayer) if only that wouldn't topple the synthetic diseased bond market. Fantastic quagmire we are in!

Wed, 11/30/2011 - 10:42 | 1929843 TruthInSunshine
TruthInSunshine's picture

Unless I am very mistaken, this exact same arrangement (Fed open swap lines to EU banks/sovereign) was done back in 2008, and the reaction of equity markets (whether directly related or not) was to plunge a further 28% or even 35% (on top of the declines that had already taken place).

 

Wed, 11/30/2011 - 10:44 | 1929857 Finnykins
Wed, 11/30/2011 - 10:20 | 1929733 GOSPLAN HERO
GOSPLAN HERO's picture

Gold and silver are the only real safe havens.

 

Wed, 11/30/2011 - 11:01 | 1929968 Roland99
Roland99's picture

what about my GRPN stocks?

 

I'm retiring when I sell them...only have about 40 years before they get back to the IPO price!

 

Wed, 11/30/2011 - 10:18 | 1929736 The Axe
The Axe's picture

Cental bankers seem to be hoarding dollars, so the premium to buy or swap euros is way to high, so this move while solving nothing, does clear the swap pipe.

Wed, 11/30/2011 - 10:44 | 1929853 scatterbrains
scatterbrains's picture

Nice call on C,  you think you might hold into the seasonal pop ?

Wed, 11/30/2011 - 10:19 | 1929746 Minoan
Minoan's picture

German 1 year turns negative

www.bloomberg.com/apps/quote?ticker=GDBR1:IND

Wed, 11/30/2011 - 10:20 | 1929749 Irish66
Irish66's picture

They keep saying its Europe, I say its our $5 bank

Wed, 11/30/2011 - 10:20 | 1929755 ZeroPoint
ZeroPoint's picture

This sounds like a classic merger/aquisition deal. The merger of all central banks is now 90% complete.

Wed, 11/30/2011 - 10:26 | 1929775 AngryGerman
AngryGerman's picture

didn't see that coming

 

/sarc off

Wed, 11/30/2011 - 10:40 | 1929821 SheepDog-One
SheepDog-One's picture

Exactly, 1 world bank forming fast, while everyone is bedazzled by meaningless equities.

Silver, gold, ammo.

Wed, 11/30/2011 - 10:49 | 1929880 The Deleuzian
The Deleuzian's picture

Don't forget the females SheepDog...Even if they steal a little here and there...They're worth it...No?

Wed, 11/30/2011 - 10:21 | 1929760 Shizzmoney
Shizzmoney's picture

"Oh, shit they are catching on!  Stall! Stall!"

Wed, 11/30/2011 - 10:23 | 1929765 Dick Darlington
Dick Darlington's picture

So, obviously someone was really on the brink behind the scenes. Someone BIG. Unicredit? Or one of the french maybe?

Wed, 11/30/2011 - 10:25 | 1929773 GeneMarchbanks
GeneMarchbanks's picture

The entire list on the S&P downgrade from last night.

Wed, 11/30/2011 - 10:28 | 1929788 ucsbcanuck
ucsbcanuck's picture

Agreed - esp since GS was on the downgrade from last night.

BAC up to $5,40 pre-open. Dog balls.

Wed, 11/30/2011 - 10:24 | 1929771 TruthInSunshine
TruthInSunshine's picture

This is the most fadable event I've witnessed in a long time.

It does absolutely nothing to address the underlying disease ravaging the EU, and merely allows EU money markets and EU bank access to operate normally (without the swap lines, there was increasing worry of the buck...or euro rather...breaking, and of bank runs on euro denominated accounts).

It is going to provide volatility for beta chasers, and it's an extremely short lived event, as it changes nothing whatsoever about EU sovereign or banking/financial sector cancers.

Wed, 11/30/2011 - 10:26 | 1929780 GeneMarchbanks
GeneMarchbanks's picture

MOPE. Perspective, psychology.

Wed, 11/30/2011 - 11:32 | 1930190 twotraps
twotraps's picture

exactly, again and again, politics driving economic decisions.  Unfortunately, govts have not had to work out structural problems when they paper over them with debt and accounting gymnasttics.  Stick with what you know.

Wed, 11/30/2011 - 10:25 | 1929772 midgetrannyporn
midgetrannyporn's picture

The recent dollar strength, the S&P downgrades, Wall Street is playing this market like a fiddle. All your $ belong to us.

Wed, 11/30/2011 - 10:26 | 1929778 Carlyle Groupie
Carlyle Groupie's picture

Thx. I needed that.

Wed, 11/30/2011 - 10:29 | 1929795 Snakeeyes
Snakeeyes's picture

Global Central Banks Go to Defcon 4 - "Fire up the printing presses, gang!" Or at Least Swaps

http://confoundedinterest.wordpress.com/

Look at Euro bond yields versus US yields. US yields actually ROSE.

Wed, 11/30/2011 - 10:35 | 1929817 lolmao500
lolmao500's picture

Let the revolution begin in the UK!

http://edition.cnn.com/2011/11/30/world/europe/uk-public-sector-strike/i...

British workers strike over retirement benefits

London (CNN) -- Mass strikes began across the United Kingdom Wednesday, with up to 2 million public sector workers walking off jobs in schools, hospitals and police stations to protest proposed pension reforms.

Message to the sheeple : you ain't getting your pensions. Ever.

Wed, 11/30/2011 - 10:38 | 1929829 SheepDog-One
SheepDog-One's picture

Wait until people here in the US soon realize their pensions are gone as well, sent to fuel a bank rescue rally, and burned to ashes by inflation to save bankers. And...its gone.

Wed, 11/30/2011 - 10:54 | 1929904 spanish inquisition
spanish inquisition's picture

Yup. The police are sent to thump the Occupy kids who are trying to educate them on the fraud and who should be arrested as their pensions are being queued up, ready to stoke the furnace. Irony.

Wed, 11/30/2011 - 10:36 | 1929822 firstdivision
firstdivision's picture

Good day to look at shorts, as this attempted short squeeze will not last as not many shorts to squeeze.

Wed, 11/30/2011 - 10:40 | 1929834 GoldbugVariation
GoldbugVariation's picture

Actually what is interesting is that the Central Banks are not printing.  Announcing QE3 would be the obvious way out of the current crisis (at least for the next 9 months).

This is a temporary fix, maybe it will provoke a nice Santa rally, but bleak reality will hit in January.

Wed, 11/30/2011 - 10:40 | 1929836 machineh
machineh's picture

 

From the Federal Reserve's Q&A:

Will activity under the liquidity swap arrangements be disclosed to the public?

Yes, the aggregate swap activity in each currency with foreign central banks will be published weekly.

Reporting the aggregate amount falls FAR short of complete disclosure. 

Why should a public subsidy of private corporations remain a closely-guarded secret?

SMASH THE FEDERAL RESERVE!

 

Wed, 11/30/2011 - 10:40 | 1929840 justtotaketheedgeoff
justtotaketheedgeoff's picture

Isn't that just like a central banker. Brings liquidity to a solvency fight.

Wed, 11/30/2011 - 10:42 | 1929845 Sophist Economicus
Sophist Economicus's picture

The corn-holioing of the shorts, pure and simple.    The dum-dums that entered short positions late last week, predicting the 'BIG ONE', are seeing how 'easy money' isn't made....

Wed, 11/30/2011 - 11:38 | 1930237 slewie the pi-rat
slewie the pi-rat's picture

hey S_E!

where's Robo so we can apologiZe?  L0L!!!

but,...who coulda seen this coming?  they have an invention, and they're gonna use it!!!

well, nobody's gonna fail, now!  please pass the shit-on-a-shingle...mmmm....europeon debt smells just like ours!

pardon moi, but would you mind passing the pepper spray, too?

 

 

Wed, 11/30/2011 - 10:45 | 1929862 Sunset chaser
Sunset chaser's picture

What does it really say when you read between the lines?

If the Federal Reserve doesn't like the way capitalism is working it will step in and take the other sides of trades until it's happier.

Nevermind that this is antithetical to the views of our founding fathers and the many Americans who have made the ultimate sacrifice to perpetuate our capitalistic society, we know better than you, because we control the spigots.

However, we are aware that we are beginning to overreach, and risk bringing down the house of cards we have built. At the very least, this will buy some time to let the insiders adjust their positions accordingly as we try to consolidate our power, which has been on the wane recently.

Wed, 11/30/2011 - 11:37 | 1930232 twotraps
twotraps's picture

agree.   I also wonder about 'overreach' you mentioned, what a shame if this is only the beginning of it and with intervention and rule-changes there becomes no place else to invest...S&P trades 2300, we all get used to it........we look back in 15 yrs and mock ourselves for not seeing that was the easiest trade to make.  Nightmare.   Change the game entirely because you were too chicken shit to make changes, alllow losses and protect what got us here to begin with....the entrepreneur.

Wed, 11/30/2011 - 11:39 | 1930243 stirners_ghost
stirners_ghost's picture

The Federal Reserve, the Federal government, the State government, even your local city government exist for one reason: to prevent capitalism.

When they want your money, they don't ask for it. They don't offer services for a price. They just take it--and use it to manipulate and distort the price of everything.

Stop revering the founding fathers as patron saints of capitalism; their renewed and refreshed brand of totalitarianism began destroying markets almost immediately.

http://en.wikipedia.org/wiki/Whiskey_Rebellion

Wed, 11/30/2011 - 10:48 | 1929873 adr
adr's picture

Most of the individual stocks are trading lower than they were in pre market trading. There was a massive selloff at the market open. Stocks like Pricline were trading +18 and opened +12. Netflix is way lower now than it was premarket. This is once again nothing but a Fed led pump and dump exit point for insiders.

The end is far closer than people realize. Corporations are having a harder time figuring out how to fake the numbers any longer. Banks are toast in reality but a nice Fed injection will make them look good through the end of the year.

Right before they go under every company tries one big hail mary in an attempt to save itself, 99% of the time it fails.

Wed, 11/30/2011 - 10:58 | 1929947 Sophist Economicus
Sophist Economicus's picture

This is once again nothing but a Fed led pump and dump exit point for insiders

Uhhmmm, like many of the hedge funds that are underwater, those 'insiders'?   And how does this explain the ramp-up in Gold, the 'arch enemy' of the Central Banks?   Or wheat, whose increasing cost will continue to increase ire amongst the 'common man'

Corporations are having a harder time figuring out how to fake the numbers any longer

Do you really believe that MOST corporations 'fake' their numbers?    Sorry adr, but comments like these suggest a simplistic world-view - either that or you're a shill for the OWS or Soros folks

Wed, 11/30/2011 - 11:14 | 1930037 Silverballs
Silverballs's picture

Repo 105

Wed, 11/30/2011 - 11:00 | 1929959 The Deleuzian
The Deleuzian's picture

You can't fight a printing press adr....Sure the banks are in 'troubled waters' but most of the big corps. (S&P) are sitting on f*ckloads right now...This can go on much longer than most realize or admit...Look for 2013 to be a killer for paper...You're right but the timing is off.....

Wed, 11/30/2011 - 11:00 | 1929961 rufusbird
rufusbird's picture

"if market conditions warrant such actions."

cause for celebration?

Wed, 11/30/2011 - 12:41 | 1930708 rufusbird
rufusbird's picture

"It appears that a big European bank got close to failure last night."


Wed, 11/30/2011 - 11:05 | 1929991 Bertie Wooster
Bertie Wooster's picture

Nice try on the explanation for what they are, but I still don't understand.  Perhaps you should teach us as if we're 2nd graders.  I have a pretty good handle on how the US dollar works and how gold works and how reserves works and the fiat banking system, but these dollar swap things make no sense to me.  I think you have to do a granular level example where we see how the money flows and who owes what and what is a debt and what is a borrow etc.....

The explanations above are circular, and explain exactly nothing about how these things work.  So if you already know how they work, the explanations make sense.   That's an oxy-something (moron?).  

So good try, but readers who don't know what they are or how they work, only got briefed on useless trivia like when they expire and which countries are involved, both of which you can get from any article on the subject today.

Wed, 11/30/2011 - 11:06 | 1929995 Bertie Wooster
Bertie Wooster's picture

Nice try on the explanation for what they are, but I still don't understand.  Perhaps you should teach us as if we're 2nd graders.  I have a pretty good handle on how the US dollar works and how gold works and how reserves works and the fiat banking system, but these dollar swap things make no sense to me.  I think you have to do a granular level example where we see how the money flows and who owes what and what is a debt and what is a borrow etc.....

The explanations above are circular, and explain exactly nothing about how these things work.  So if you already know how they work, the explanations make sense.   That's an oxy-something (moron?).  

So good try, but readers who don't know what they are or how they work, only got briefed on useless trivia like when they expire and which countries are involved, both of which you can get from any article on the subject today.

Wed, 02/29/2012 - 12:06 | 2208121 Bertie Wooster
Bertie Wooster's picture

I guess the two people who voted down my post understand this swaps business America is conducting.  All the power to them, but I would rather had them explain in the comments than vote down a plea for illumination.

Wed, 11/30/2011 - 11:22 | 1930093 OliverTwist
OliverTwist's picture

Somebody can help me out with this: lately an increasing number of italian friends are asking my opinion about buying/investing in BTp's (italian treasury bonds, like for example the 10 year bond). I really care about these people so I tried to explain them that BTP are not risk free/high return investments. I also tried to move them to buy phisical gold. But somehow my arguments seem to be not strong enough. They are still going on telling me that "Gold is too expensive at these levels! and "Italy won't go in default."

So guys, I need some additional ammo. Some easy to understand arguments to open the eyes of the normal concerned, brainwashed citisen! I'm really running out of arguments against the big propaganda machine!

All comments are welcome and very appreciated (also in italian!!).

Thank you!

Wed, 11/30/2011 - 11:45 | 1930282 Ethics Gradient
Ethics Gradient's picture

Tell them to do it. Tell them that it only needs 2000 people to invest a billion euros each into Italy and the place will be fine.

Incidentally, I got the numbers from the excellent: http://twitter.com/#!/angela_d_merkel

Wed, 11/30/2011 - 12:38 | 1930676 Insiderman
Insiderman's picture

This IS another form of QE, but worldwide.  This will lower borrowing costs, create liquidity among countries that can't afford to borrow at higher rates, drive up asset prices... it's inflation in a capsule.  Money expansion is inflation; price level increases result (price level increases are NOT inflation).

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