MF Bankruptcy Causes Biggest Foreign Bank Liquidity Scramble To 'Fed Safety' Ever, Harbinger Of Major Eurobank Stress
When Lehman filed for bankruptcy in that fateful week of September 2008, one thing caught everyone's attention: the epic surge in the Fed Reverse Repos originated by "foreign official and international accounts": essentially cash placed at the Fed by foreign institutions in exchange for collateral, primarily in the form of Treasurys, as well as other securities. This is nothing but an immediate cash parking in a 'safe place', which withdraws overall liquidity from the market, and as has been noted elsewhere, serves as an indirect gauge of banking system funding stress. In the week of September 24, this number soared from $46.6 to $93.7 billion, a $44 billion increase, or the single biggest jump in the history of the series. Well, as the chart below demonstrates, what happened with MF Global caught foreign banks, which as we have noted over the past several weeks have been dumping US Treasury and MBS paper, entirely by surprise as they scrambled to withdraw the last traces of available liquidity from the market, and to place as much of it as possible within the safety (and we use the term loosely) of the Fed. In the just released H.4.1 update, foreign Reverse Repos with the Fed soared from $81.3 billion to $124.5 billion, the most ever, and a weekly surge of $43.2 billion, the second largest ever, second only to the Lehman collapse. Furthermore, as noted daily, European banks have been doing precisely that with local cash from non-US subsidiaries, and parking near record amounts with the ECB (today the European central bank disclosed a whopping €253 billion had been deposited with it: just shy of the 2011 high), even as they have been dumping US Treasurys on one hand, and now are forced to repo what little paper they have left with the Fed due to systemic uncertainties in the MF aftermath, one can see why suddenly there was absolutely no liquidity left in the market, and why the meager €3 billion EFSF bond offering, so desperately needed to fund the ongoing Irish bailout and which incidentally is the story of the week, had to be pulled.
Behold the surge in weekly international reverse repos:
And the total weekly international reverse repo notional: we have a new all time record!
As the chart below shows, Fed reverse repo notionals are a very distinct leading indicator to the inverse performance of European financial stocks. Considering this, it would stand to reason that European banks are set to have some very turbulent upcoming days, as the money which should be in the market and be used to buoy European fin stocks, is far, far away, parked at some server located at Liberty 33.
The moral of the story is that the MF Global bankruptcy happened at the worst possible time. On one hand, European banks have been dumping tens of billions of US Treasurys, yet with the aftermath of this primary dealer bankruptcy, they have had to halt such sales and instead pledge USTs as collateral, thereby completely soaking up all incremental liquidity in the market. Recall that reverse repos are used by the Fed as a liquidity absorbing mechanism.
Which means that, all else equal, the pain for European banks, courtesy of the allegedly criminal mismanagement of the company of one Jon Corzine, is about to hit previously unseen levels.
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Which means that, all else equal, the pain for European banks, courtesy of the allegedly criminal management of the company of one Jon Corzine, is about to hit previously unseen levels.
perhaps alot sooner than you think.
J. Corzine, MFCEO, Getting Slapped With A Subpoena
http://money.cnn.com/2011/11/03/news/companies/mf_global_subpoena/
So when does it all fall apart.
Probably never. These evil assholes are actually quite adept at keeping the ball in the air for a long long time.
http://fucklloydblankfein.blogspot.com
Presented without comment ...
http://www.youtube.com/watch?v=-HaUQhzqwJs
... if you can't figure this math out ... or which side you are on ... well ... <insert some crap about history you won't read here> ...
Regards,
Cooter
When does it fall apart? When oil (WTI) is a little over $100. Give the DOW another 15% at most. When it's that much higher, WTI will be knocking on $110.
All of this has to do with oil. From the Fall of '08, to the Wars around the globe, to the current collapse of the Fiat Ponzi, it all comes back to oil.
Cockroach banksters will surive holocousts and nuclear attacks.
Live with it bitchez!
I agree, I'm beginning to think that after what happened in 08 with the Lehman crash, and Paulson scaring the shit out of the dumbfucks in the House and Senate, that this will never end because nobody's watching the store. I wonder if they can just splash as many digits around the world as they want with impunity.
They can; until gold is worth how much though? $100k per? LOL!
Like all good shoplifters, the one's on Wall St. are watching the store. Loot and pillage my friend.
It took 20 years for the Savings and Loans to finish in court, WorldCom is still going, BreX I don't think has ever been closed.
Courts for baby lawyers to get their teeth cut and endless legal fees, what could be more kenysian.
Frankly I'm bullish about the whole thing...lol
What was truly funny today was when a they thought Jeffries was another MF. Whitney had to come out and essentialy defend them saying they weren't risk takers. People where saying they where the same size and same rating and where investing like MF. I think that there are alot of bodies that are about to float to the surface and MF was the first.
And as of right now this minute, go to CNBC and Commerzbank is the next body. This is getting crazier and crazier.
Well of course they are, CNBC can't justify it's 24 hour infomercial channel without defending it's sponsor.
J. Corzine, MFCEO, Getting Slapped With A Subpoena
prefer...
J. Corzine, MFCEO, Getting Beaten Senseless with an Arrest Warrant.
Bernie Ebers comes to mind. When does he get out?
This is bullish, right?
Definitely bullish ... extra bullish with some bullishness on the side. Hell, with all this extra bullish news coming out over the past few days, I don't know why we're not at Dow 14,000.
This is black swannish of the soft variety, like a felt swan swimming down a river of ashes.
signed,
Pancho Neruda Six
In the language of "1984", its double plus bullish!
To the printing presses! Damn the inflation, full speed ahead!
So how fast can the money parked at the fed be recalled to the banks?
It's not a question of speed. It's a question of confidence (ref: Jefferies). With the SEC's perpetual inability to enforce anything, and with moral hazard every place you look, confidence is gone.
The question is, how many more primary dealers are going to drop off in the next week or so?
That's a good question. I think the other good question is how many go away before we hit a confidence breaking point. I think maybe two more is the limit, and they better be small.
I would guess some Euro land primary dealers are hurting.
TD, I must dissent. All global markets needs is ... well ... more cowbell. If the 'Nank had three neurons touching in his skull, he'd have Christopher Walken on the white courtesy phone stat. I mean, he puts his pants on and knocks out GOLD!
Baby, don't fear the reaper.
Regards,
Cooter
Thanks. So it's not really an issue for the bank making the deposit so much as it is for the OTHER banks that might have wanted to use the funds?
To me it doesn't look like "perpetual inability" to enforce anything. It looks more like corrupt refusal to enforce their own regulatory laws. I can only buy the ignorance cop-out so many times before it just looks like blatant corruption.
It is, without question, blatant corruption.
you got it
If all the bastards go to jail, who will replace the useful idiots?
a) They're not idiots. They are very deliberately complicit and corrupt!
b) There are plenty of reserves all warmed up and waiting on the benches for an opportunity to take to the field!
For every politician who "won" a chance to dip their snout in the swill trough, there are 6 more who lost and will be trying again.
For every bank executive who got promoted to a "bonus" slice of the swag, there are a dozen more jostling for position to take their place.
For every career regulator who has turned the other way and pocketed a bribe, there are a dozen more waiting to take their place as they exit through the revolving door to a cushy position with a "benefactor".
It's the system that is corrupt, not just the individuals who are "following the rules", "following orders" and/or "following the money".
As a corrupt senior cop once confided in me when I asked him why he did it: "You either get on the bus or get run over by it!"
Government is the problem, not the solution ... and the biggest problem of all is a remote central government!
SECEDE NOW!!
What are the remaining factors between the present situation and a cascade of liquidity withdrawal like the one that made the Fed and Treasury say we were hours from collapse in '08? Just time, or were there other critical factors which have yet to rear their heads?
When the sharks smell this much blood in the water....could be just one more little moronic keystroke away that causes some great white to take a big ole bite and take this corpse down. Happy hunting.
Oh that shark bites . . . with its teeth babe.
There is no shark in the water. Have been looking to see one since 2007 but none sighted yet.
.
.
Multiple connent - sorry all
Exactly.
Why are many here at ZH pulling cash out of the financial system and parking it in hard assets, e.g. precious metals?
Maybe in part, but grab a gold coin, heft it in your hand as you gaze at the pretty color. To get that feeling from looking at a paper account I think you'd need a 7 or 8 digit number on the bottom line.
Maybe because precious metals have outperformed most stocks since the beginning of the year (and before, too).
How is this taking cash out of the financial system?
You pay money to someone, what do they do with it?
It goes to all the employees of the mint and the mine and all they consume, it goes to taxes on the mine and the employees and all they consume. It goes to the driver who delivered the fuel to the mine, to his boss, and the trucking company itself, and to taxes on the drivers income, all he consumes, taxes on the trucking company, taxes on the fuel .....................etcetera etcetera
In the end,
It mostly goes to taxes.
btw as I understand it looting, pilaging or outright theft of account funds, should it cause a default/bankruptcy does not technicaly trigger a cds payout just so you know.
you are wrong
...confidence is gone = lose your counterparty = buy gold
Has the mission been completed? You know that I have the greatest enthusiasm for it.
Whee!
Boom! Bitchez...
lets get it clear.. will the eruo go down or up?
i am interesting in currencies only.
Any sugestions?
are you interesting even then (snippy)?
is this steve liesman from cnbs? I know those guys come on here
You got junked for expressing self-interest...that's not yet acceptable to some on ZH.
Oh crud.
I thought self-interest was why we were all here.
Got junked for saying stupid shit. You're picking up on a distinct bias ZH has against dumbasses.
He got junked for for speaking out of turn, if he wants FIAT markets, there are a half dozen place he could go to.
He got junked for for speaking out of turn, if he wants FIAT markets, there are a half dozen place he could go to.
Why do I suspect he's not interesting in any language?
Oh, all right, the euro will fluctuate.
Market rallied 25% since then.
Since Monday?
Sorry Tyler, misread the date.
Brutal. I think you're getting junked for showing weakness.
Dear Tyler Durden:
Denying a recent freedom-of-information request from a citizen of the United Kingdom, the Bank of England has insisted on secrecy for its swapping and leasing of gold from the national reserves.
Replying on October 24 to GATA supporter James Burn, who sought a more precise accounting of the British gold reserves, Bank of England spokeswoman Jackie Keating wrote that the gold swap and leasing information is "market sensitive" and its disclosure "would allow enquirers to find out what gold transactions have been taking place." This, the bank's spokesman wrote, would impair the interests of both the British government and the bank's "private customers," to whom the bank "owes a duty of confidentiality."
The statement thus confirms that the Bank of England is surreptitiously active in the gold market on behalf of both the British government and the bank's "private customers" and that the interest of British citizens in knowing how their government is meddling in supposedly free markets is quite secondary.
Thanks to our friend Bern, it thus has been demonstrated again that there is plenty of financial journalism to be done simply by pressing central banks with questions about their surreptitious activity in the gold market.
Who will be the first financial journalist to attempt this and to have enough resentment about being shut out of the public's business that he publishes a news story about it?
Is there such a mainstream financial journalist willing to risk his invitation to a few very nice Christmas parties and his access to highly placed official sources?
The Bank of England's reply to Bern has been posted at GATA's Internet site here:
http://www.gata.org/files/BankOfEngland-GoldSwaps&Leases-10-24-2011.pdf
CHRIS POWELL
This has been going on forever though.
Hell, Brown sold off all the gold for pennies, i'm not sure there's all that much left to meddle with.
That's a lot of pennies!!!!
OS ANGELES (MarketWatch) -- Bankrupt broker MF Global Holdings Ltd. /quotes/zigman/7192996 MFGLQ +11.24% may have tried to disguise its debt through window-dressing, temporarily deleveraging ahead of releasing quarterly results, The Wall Street Journal reported Thursday, citing its own analysis. The U.S. Commodity Futures Trading Commission is already looking into reported shortfalls in customer funds at MF Global, which filed for bankruptcy protection earlier this week. The Wall Street Journal reported separately Thursday that MF GLobal Chief Executive Officer Jon Corzine, formerly governor of New Jersey and CEO of Goldman Sachs Group Inc. /quotes/zigman/188479/quotes/nls/gs GS +0.11% , has hired prominent defense attorney Andrew Levander of Dechert LLP to represent him if legal matters arise. The latter report cited unnamed people familiar with the matter
http://www.marketwatch.com/story/mf-global-may-have-hidden-debt-wsj-repo...
This is why I just want to bang my head on the wall every time I hear politicians say we need more regulations. The regulations we have are sufficient to ensure healthy market operations. What we need is proper enforcement of those regulations. Which would begin with non-corrupt regulators who know what the fuck they're looking for. As it stands now, the regulations are little more than words on a page because the regulators are not enforcing their own laws ... whether it's because of ineptitude or corruption.
and would that it were limited to white collar crime. oh no, we've got to take extra legal imprisonment, illegal war, torture, rendition, assassination. of u.s. citizens no less. change you can't refuse.
You left out Drug Prohibition.
"The Latin American drug cartels have stretched their tentacles much deeper into our lives than most people believe. It's possible they are calling the shots at all levels of government."
- William Colby, former CIA Director, 1995
Every authoritarian dreams of a world where all actions are illegal but they alone get to choose who will be prosecuted. We aren't very far from that world. Anyone want to bet that the MF Global situation gets off-loaded onto some rogue Nigerian account manager?
Why waste your time enforcing regulations when you can watch the latest Evil Angel porno on the internets? Isn't that what regulators are paid to do? Watch porn?
And we need some executives with morals - remember those?
the 'market' will always be one-step ahead of the regulators ... ask old Joe Kennedy Sr ... the original head of the SEC
MARKET=MAFIA
In 1933 Joseph Kennedy's years of partnership with the Mafia in the bootlegging business, along with a lot of garden variety swindling, have seen his fortune grow to about two hundred million dollars. TPTB have wrung as much profit out of Prohibition as they can and it's time to change the rules of the game again.
As the repeal of Prohibition becomes imminent, Kennedy exploits his position as Franklin Roosevelt's bagman and takes Roosevelt's son James on a little trip to Britain.
The Roosevelt name gets Kennedy access to some of Scotland's largest distillers and he returns to the U.S. with the distribution rights to Haig & Haig, Dewar's Scotch and Gordon's Gin. Kennedy is able to exploit his Washington contacts to obtain import licenses for large quantities of liquor for "medicinal purposes" and fills his warehouses with Scotch and gin. When Prohibition is repealed on December 5th, Kennedy is ready to meet the demand and make another fortune.
The Securities and Exchange Commission (SEC) is created, theoretically to clean up the financial swindling industry which has ravaged the wealth of Americans.
Franklin Roosevelt, having a puckish sense of humor and owing a favor or two to "Jittery Joe" Kennedy for cash received, appoints him as the SEC's first chairman.
As one of America's leading financial scam artists and stock market swindlers, Kennedy certainly knows how the crooks work. Roosevelt justifies the appointment by telling an advisor that it takes "a thief to catch a thief."
You just can't make this shit up.
I repeat myself:
"The Latin American drug cartels have stretched their tentacles much deeper into our lives than most people believe. It's possible they are calling the shots at all levels of government." - William Colby, former CIA Director, 1995
Regulatory capture, legislative capture. Ah, sweet for the money masters. Until the marketplace is saturated with more corruption, self-dealing, and systemic risk than the global matrix can stand, at which point we experience criticality. That last grain of sand detaches from the slope, and...
Is there a Wiley Coyote moment in the offing, or just more crisis fatigue?
As long as there is internet porn to distract it, the SEC will remain flaccid in prosecuting Wall Street criminals.
Na, regulation smegulation... I do have the porn site and password to the SEC account thou.
"We need more stringent regulations," uttered by a congress-critter means "I'm bought and paid for, thank you very much."
Gold bugs will be blowtorched as there is a mass dash to the safety of uncle Gorilla fiat paper
SBUX, NFLX, LULU, and XRT are all screamers punching through resistance levels
Big buyers will swoop in tomorrow to pick great names like SBUX and JEF, bears will be throwing up blood
Is that you Robo?
And... gold bugs don't get torched... paper traders get torched.
Torch my gold and I just recast and stamp it... still all there.
haha... I can't believe that worked so quickly
Well, we've determined you are not Robo as he never responds.
It's funny because he says the same thing over and over again.
His trading vernacular is very limited to the point it is instantly recognizable. It almost sounds scripted to me.
Indeed, it is almost like he is a bot.
That would be fitting I guess.
*edit* I am not your junker btw.
I could care less about junks.
You couldn't care less, bob. Think about your words.
Unless I really do care about getting junked
Or perhaps I was using it as a reprensenation of sarcasm, in which case I suppose I should have followed through with /sarcoff
Perhaps the true tragedy is that now you will never know if I truly could care less, or couldn't care less, or if I'm being sarcastic about caring.
or, you're just another lying, racist, asshole troll (that nobody likes).
but i'm sure you already get that a lot.
On a side note, paper ignites at 451 degrees Fahrenheit. Gold melts at 1,947.52 degrees Fahrenheit.