Central Banks Add $72 Billion to Markets to Stem Credit Crunch (updated)

[Zenlitened]

Source: CNBC

Central Banks Add $72 Billion to Markets to Stem Credit Crunch

By CNBC.com | 13 Aug 2007 | 10:06 AM ET

The Federal Reserve joined the European and Japanese central banks on Monday by continuing to add funds to the global banking system to stem a potential credit crunch.

The Fed added a relatively tiny $2 billion when U.S. markets opened at 9:30 am Monday following an injection of $38 billion last week. It was the Fed's largest injection of liquidity since the Sept. 11 attacks six years ago.

Earlier on Monday, the European Central Bank injected $65.12 billion in the euro-zone money markets, while the Bank of Japan pumped $5.1 billion into the banking system.

"This morning, we can say a big thank you to the European Central Bank," said Arthur Cashin, UBS director of floor operations. "Aside from throwing more money into the system, they also announced that they thought the credit markets were beginning to normalize."

The central bank moves are aimed at preventing a further credit squeeze that erupted last week when subprime loan problems began surfacing in Europe.



Read more: http://www.cnbc.com/id/20246769

---

ECB, BOJ, Fed Again Add Liquidity to Markets

By JOELLEN PERRY, Wall Street Journal
August 13, 2007 10:02 a.m.

Central banks again pumped cash into markets Monday morning, amid continuing concern about a global credit crunch, but the European Central Bank said market conditions are "normalizing."

In its third consecutive unscheduled cash injection, the ECB pumped €47.665 billion ($65.28 billion) into euro zone money markets. That follows the €156 billion the bank put into markets last week as overnight lending rates shot up on concerns about European banks' exposure to the U.S. subprime market. The Fed injected $38 billion on Friday, following a $24 billion intervention Thursday. On Monday, the Fed said minutes after the opening bell that it would add $2 billion in liquidity in a one-day repurchase.

(snip)

Central banks manage economic growth and prices by setting a target for the rate on overnight loans between big banks. Then, they use open-market operations to increase or decrease the supply of funds in order to keep the market rate near the target. When the rate moves far above the bank's target rate, it signals that liquidity in the market is tight. Fears about subprime exposure have made many banks reluctant to lend to one another in recent days.

(snip)

"Things seem to have calmed down a bit and we've started out the week certainly far better than we ended it," says Neville Hill, economist at Credit Suisse in London. "But it's a bit too soon to say we're out of the woods yet." With markets still rattled, Mr. Hill believes any further revelations of European subprime exposure could re-ignite lending fears.

Link:
http://online.wsj.com/article/SB118699404987895783.html?mod=moj_latest_news

[OnceUponTimeOnTheNet]

1. CNBC ~2Billion added. That's not the 7 expected for normal operations.

I have no idea what that means, really.

[Double T]

2. The day is still young, many more bailout billions to come.

[fredrickdouglas]

6. No Idea What It Means? Good!

That seems to be the point of the reporting. The press is reporting on this gov't welfare scheme because they have to. But they aren't providing any kind of serious explanation or analysis at all.

62 billion in 3 days from the Fed. Over a 150 billion by the European Central Bank. This is approaching a quarter of a trillion bucks in just a couple days. NOT INCLUDING THE ASIAN BANKS!

And, of course, this is only what they are telling us.

All to stave off fears as rich people pull their money out of a sinking ship. That's what they mean by the opaque term 'liquidity crunch'--the rich running off with money that isn't there.

It's difficult to overstate how important these actions are and the press just isn't covering it beyond superficial buzzwords and opaque terminology designed not to inform but to allay fear.

[Zenlitened]

8. It all does seem a bit patronizing, doesn't it?

LOL! :D

"There is no Bad News, there is however news that's Slightly Less Cheerful than what we told you yesterday. So slight, in fact, that it's actually Good News!"

Oy.

One of the hosts on CNBC blurted out a bit of truth this morning. Some talking head was denying this is all a bailout for the hedge-fund heavyweights, saying this is in fact the Fed (and overseas counterparts) doing their duty to protect ordinary investors, blah blah blah.

Host blurts out, "Yeah, that's what hedge funds do, they use the rest of the market as human shields" to protect themselves when their schemes go bad.

:rofl:

[redqueen]

14. "not to inform but to allay fear"

Yup... gotta give those fatcats time to escape with what they can.

Well, if we won't learn from history...

[Viva_La_Revolution]

3. anybody have the total from the last time this happened

(after 9/11) I think with this $ added, we have doubled the amount they added then. :scared:

[angstlessk]

4. Is this borrowed money we will pay interest on or just printed money?

will it add to the deficit? or is it just pictures on paper?

[HereSince1628]

5. Is it my imagination or is the ECB pumping in more money than the US?

If so, can I assume that means that Europeans are more heavily invested in subprime than the US?

[Zenlitened]

7. Spiegel Online has a good write-up

Europeans definitely are pouring lots of money in:

Bailing Out the World's Banks

Spiegel Online, August 13, 2007
By Beat Balzli, Dietmar Hawranek and Christoph Pauly

The US subprime mortgage crisis has hit banks and stock markets worldwide, revealing just how fragile the money network is. The European Central Bank has just announced its third cash injection into money markets since Thursday. But is it enough to restore business as usual?

(snip)

Last Thursday, when the first shock waves of the American real estate crisis had just reached Germany (more...) and mid-sized bank IKB had just been saved from collapse with a big financial infusion, Jean-Claude Trichet, president of the European Central Bank (ECB) was already talking about a "normalization" and urging investors to keep their cool. The fact that he was calling for calm was enough in itself to make investors nervous.

But on Wednesday of last week, even Trichet was having trouble keeping his composure. The financial bailout he launched was bigger than anything the world has seen since the terrorist attacks of Sept. 11, 2001.

The ECB's cash infusion provided banks with close to €95 billion at 4 percent interest on Thursday. That was followed up with another €61 million cash injection on Friday, and a third injection of €47.67 million on Monday. Other central banks around the world, including the US Federal Reserve under its chairman Ben Bernanke, have followed suit with their own cash injections, with Japan's central bank injecting 600 billion yen (€3.6 billion) into money markets Monday.

The liquidity the ECB was offering banks was even more than it had made available after Sept. 11. But instead of allaying fears, this concerted action on the part of international high finance only caused additional nervousness on the markets.

More:
http://www.spiegel.de/international/business/0,1518,499621,00.html

It's a two-page article, worth reading if only to drive home the point that this is a worldwide issue, no doubt about it. The big banks, the big funds... they don't confine themselves to national borders when it comes to horse-trading credit, debt, etc.

[DemReadingDU]

15. Or maybe the ECB has lots more in reserves than the Fed?

:shrug:



Edit: Maybe the Fed doesn't have enough in its reserves to handle the crisis?

[HereSince1628]

18. That's an interesting point to consider n/t

[rodeodance]

9. I recall the distain the WH cabal had for 'old Europe"-----The WH owes

them an apology and a thankyou!

[femrap]

10. There goes all our purchasing power....

if you can't solve the problem, these stupid idiots running our country throw money at it.

[Hugin]

11. ... and they say we -hate- X-mas! That's when the inflation from these 'injections'...

will hit full force.

No wonder Rover bailed. :eyes:

[femrap]

24. I'm having an ANTI-MATERIALISTIC

Xmas this year...Food, Family, and Friends....no mass-produced gifts whatsoever. Either I make it or buy something from a local artist or shop.

And I plan on telling others to do the same. Why people want to go into debt buying toys and crap for their kids is ridiculous. They have been so brainwashed by Consumerism.

[Hawkowl]

12. Pissing on a forest fire

That's the effect of adding $72Billion liquidity to the credit markets. The recession will be sharp, harsh, deep and long. It is not cyclical but structural in nature and will require some structural changes in the economy.

[petgoat]

13. The cunningrealist wrote an interesting piece about liquidity

and crises two years ago: http://cunningrealist.blogspot.com/2005/07/following-money.html

I'd add that any discussion of liquidity should include consideration of the injection
into the system of $500 billion a year of cash from the illegal drug trade.

Without that, the international banking system would collapse.

[Hestia]

23. re: $500 billion a year of cash from the illegal drug trade.

Catherine Austin Fitts was on a radio program a couple of years ago saying that the illegal drug trade had figured out a way to lauder the funds through mortgages. Whatcha bet that's what all this is? Loans to Peter, who owed Paul, but Peter ends up being a fictious person - which would go hand in hand with the 'no-docs' loans.

[kineneb]

16. sounds like using bucket to bail the Titanic

-this issue is far more important than Rover "leaving"... which may be a smokescreen...

-if ECB is putting in more than US/Asian banks, does this mean the Fed is broke? Seems fishy.

-USA, now a wholly owned subsidiary of China, Inc. and the ECB?

[DemReadingDU]

17. Oh, Oh, Oh

By Rove announcing his resignation today...it could be a distraction so that the MSM doesn't discuss the market crisis.

:shrug:

[redqueen]

25. That's what I've been thinking all day...

I wonder if they jumped the gun just a little bit.

[Gregorian]

19. Well well. I predicted this over the weekend.

I had a "conversation" with one of my smartypants friends who seems to know so much, since he subscribes to that journal that was just bought up by "just some strange Australian guy". And it looks like my sense of things isn't too off target. Europe isn't going to bite the dirt. They'll prop us up, for a while. Until they can get a divorce.

[rodeodance]

20. AFP: Fed pumps two billion dollars into US financial system

http://news.yahoo.com/s/afp/20070813/pl_afp/marketsfinanceusbank_070813143839;_ylt=Agyg7U9l5cTNIOPO_qrirris0NUE

Fed pumps two billion dollars into US financial system

1 hour, 26 minutes ago

WASHINGTON (AFP) - The Federal Reserve on Monday pumped two billion dollars into the jittery US financial system just after the stock market opened, the Federal Reserve Bank of New York said.


The Fed injected tranches totaling 62 billion dollars Thursday and Friday into the financial markets to ease tightening credit linked to the crisis in the US subprime mortgage sector.

In a statement Monday before the financial markets opened, the New York Fed said that it "stands ready to conduct additional operations later in the day as needed."

The latest injection is much smaller than the central bank's massive 38 billion dollars pumped into the banking system Friday, its biggest operation since the week of the September 11, 2001, terror attacks.

On Thursday the central bank pumped 24 billion dollars into the market, amid sharp falls on global stock markets which were triggered by fears over the multitrillion-dollar US mortgage market and a related credit crunch.

[mikelgb]

21. how do I get the fed to pump in money to prop up my economy?

[Javaman]

22. It was reported today that...

the mint has run out of the "special" linen paper that the US dollar is printed on.

In a special emergency session of congress, they gave authorization to the president* to merely initial monopoly money until more linen can be found.

One senator was quoted as saying, "well, at this point, does any really notice a difference?"

[fed-up]

26. thanks-I needed that :) nt

[Javaman]

27. Nice to know these banks got a lot of mileage out of that 72 billion...

as of 2:30 pm central time, the dow is up a whopping 19 points.

:rofl: :cry: :shrug:

[TheWatcher]

28. They got no mileage at all.

The Markets all closed down.

[doc03]

29. Where are all the Democrats raising Hell about

Corporate Welfare? Did the government bail anyones pensions out? Did the Government bail out the PBGC. What about the Bankruptcy Bill did the regular working guy get any bailouts? What about the people who get thrown out of their homes?

[WCGreen]

30. IT's from the Fed...

They have no control over the system...

The FED is a Quasi-governmental system whose main constituency is the Banking Industry...

The problem with the Mortgage Industry is that the people making the loans are not the people who service the loans...

Third Party so-called Mortgage Brokers shop around for the best rate from all the lending companies...

These Brokers relax lending rates so they can flip the the paper and get their commmission...

Of course they got greedy and the Hedge Funds saw a gold mine in holding the paper for little to no investment...

Well, then people started to default on the loans these Brokers Brokered...

[doc03]

31. Doesn't the money for the Fed come out of our pocket in the end?

[WCGreen]

32. In a way it does since the more cash chasing the same amount of

goods lowers the purchasing power of the dollars we had in savings or on hand...

[defendandprotect]

33. Are any of the candidates for prez being asked about this "economy" -- ????

[olddad56]

34. As they put the money in, who is taking it out. The market is still dropping.