Reply #11: So, my tin foil hat theory

[Celebration]

Banks were required to implement FASB 157 in late November, meaning that they had to attempt to value their assets at fair market value (interesting concept, eh?). So everyone knew this was coming, and that it would at the very least erase all the banking reserves of our entire country.

So, simultaneously, some other things were going on--

Discount window borrowings just about stopped, in favor of special auctions by the Fed. The special auctions are actually below the discount rate, so the banks benefit. Also they don't have the stigma of having to borrow at the discount window. So discount window borrowings are now NEARING ZERO.

When the net borrowings were calculated, the past formula, from 2003, at least was

excess reserves minus (total borrowings plus secondary borrowings)= net borrowings

IMHO, discount window borrowings would definitely have been included in the total borrowings figure.

NOW it is

excess reserves minus (discount window borrowings plus secondary borrowings)= net borrowings

Note that discount window borrowings, which are nearing zero, have been substituted for total borrowings.


So, now the questions:

What was in the total borrowings figure?

Discount window borrowings had to have been included in "total borrowings." But that certainly wasn't the only type of borrowing included there.

Where are the borrowings from the Fed in these new auctions put into the new formula calculating net borrowings?

By narrowing the "total borrowings" to "discount window borrowings" as being subtracted now, is there a loophole by which the new auction amounts are left out of the formula completely.

Those are the questions I want answered. There may be a simple explanation. I don't know.