Fed ups auction amounts to aid banks

Fed ups auction amounts to aid banks

news.yahoo.com

The Federal Reserve announced Friday that it is increasing the amount of money available to banks through the new auction process it created to ease the nation's severe credit squeeze. The Fed again pledged to continue the auctions "for as long as necessary."
The Fed said that it will increase the amount offered at each of the next two auctions from $20 billion to $30 billion, a 50 percent jump. Those two auctions will be Jan. 14 and Jan. 28.

(visit the link for the full news article)

I really dont quite understand this, can someone explain?
I think what they are saying is that they are going to give the banks more money that the banks are going to continue to hoard.
How can we fix our economy by dumping billions into an already over extended credit system to offer more credit to fix our credit woes?


news.yahoo.com
(visit the link for the full news article)

I am confuse also because it looks like more money for banks to keep providing credit.

I could be wrong.

This is exactly the type of manipulative stuff the Feds do to try and prop/fudge numbers! So now, on paper, the US is still looking good. Yeah right.

What we've been given today is a 1-2-switcharoo by the Feds: First, the Feds created the only jobs during Dec 2007, giving the job rate less of a percentage loss. Second, the Feds increase the money available to banks and go so far as to change the wording from 'discount' to 'auction'....

Yeah....the US is still looking good....

Chairman Ben Bernanke and his colleagues decided to try the auction approach because their efforts to inject funds into the banking system through direct loans to banks had not been as successful as hoped.

Banks were hesitant to borrow money directly from the Fed, using a process known as the Fed's discount window, for fear that it would carry a stigma that would raise doubts among investors about the soundness of institutions using the discount window.

They can only stall the inevitable about the US economy for so long....

Seems like taking out a loan to pay for another loan that you are already defaulting on before your house is auctioned off.

reply to post by CaptGizmo


Exactly my thoughts, how can we fix our credit with credit? I think it is once again another bandaid for our economy and more bail out for the banks.

reply to post by SEEWHATUDO


How can we fix credit woes with more credit? easy that is how our economy has been able to function for a long time.

Need money for wars and to support domestic spending? borrow money from foreign nations like China, Japan and UK.

People needs money to keep up with he bills? borrow more money to pay bills and standing loans with more loans.

Banks need money to keep the credit merry go around, just borrow more money from the printing press of the never ending money making federal reserve.

Are we already in trouble or what?

reply to post by marg6043



OY, dear friend,

the actual monies the Fed/Central Banks are 'borrowing' are actually
all the 'investments' that nations like China-Russia-Abu Dabi are pouring into
buying up portions of the USA economic infrastracture, like Citigroup
and others............with these foreign nation's SWFs (Soverign Wealth Funds)...

the Fed has plunked the fishing 'Lure' in front of their faces
and they 'Bit' the bait.

'they' can't afford not to buy into the game...or they'll lose all their trade surpluses (China appox 1.5 trillion...)


just a heads up for anyone astute enough to buy the 'financials' which look hopeless right now.

Originally posted by St Udio
reply to post by marg6043

 

just a heads up for anyone astute enough to buy the 'financials' which look hopeless right now.

Well the voltures are waiting ready to jump on the sell out banwagon.

Kuwaiti fund eyes US subprime bargains

www.ft.com...=e8477cc4-c820-11db-b0dc-000b5df10621.html

Abu Dhabi Investment Authority had good timing,” he said, noting that it took ADIA less than three weeks to seal its late November deal to invest $7.5bn in convertible securities in Citigroup.

Foreign central banks net buyers of U.S. debt: Fed

The Fed said its holdings of Treasury and agency debt kept for overseas central banks rose $14.667 billion in the week ended December 26, to total $2.062 trillion.

Also,

Overseas central banks, particularly those in Asia, have been huge buyers of U.S. debt in recent years

www.reuters.com...

This is the biggest reason the dollar is, and will continue to tank. The FED operates with the assumption that if we print more money (debt), we can alleviate the problems. The more greenbacks printed and in circulation with no hard currency to back it, the less valuable it is. It's a very simple process and one that is going to cost anyone who is not filthy rich, very dearly. Anytime you see the FED inject "liquid" assets into the system, it's is a nice way of saying that they paid the treasury 4 cents on the dollar to print some money. Based on what I read, that is what they are up to here.

[edit on 4-1-2008 by BennyHill]

St. Udio, I greatly respect you opinions on finance and the economy but
I'm not touching any financial on the long side till there is a little more blood on the streets. There is a case to be made that there are some bargains to be found but until they are forced to mark to market as opposed to mark to make believe whatever is in those SIV's that are off balance sheet i'm not tasting that koolaid. Too many companies are waiting for St. Warren to appear with his $50 Billion and save the day. I'm sure there is a financial somewhere that doesn't have SIVs that if forced to mark to market would make it insolvent, but I'd rather wait till the ones that do go down hard and drag the whole sector with it. I wish i had loaded up on puts earlier this week, but i missed this move today. I'm gonna wait for the coming "dead cat bounce" and deploy my trading assetts accordingly. In case you missed the employment numbers today it's pretty much a given that we are in a recession. I think the average market loss during a recession is 20%-30%. I think we may be 10% off of the recent highs as of today so there is room to make some money on the dark side for those with the risk tolerance.

It will be interesting to see what happens monday. Does the retail investor who has been conditioned to"buy the dips" buy this dip , and we get a rally? Does the soon to retire boomer not sleep well over the weekend and dump equities on monday? Does the Fed polish the mirrors and fire up the smoke maching for a monday surprise? Will margin calls cause a collapse in non interest bearing/dividend paying assetts i.e. gold, oil, other commodities? All good questions, and here is my uneducated opinion on probabillities for monday. 55% Dead Cat Bounce but not nearly enough to recoup this weeks losses. 20% trades flat no major move one way or the other. 20% selloff continues at this weeks pace. 5% an honest to God crash.