US Fed statement on coordinated cbank money mkt action

[Ghost Dog]

Source: Federal Reserve via Reuters

Thu Sep 18, 2008 3:14am EDT

WASHINGTON, Sept 18 (Reuters) - Following is the full text of a U.S. Federal Reserve statement on coordinated central bank action to ease money market stress.

Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.

FEDERAL RESERVE ACTIONS

The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements (swap lines). This increased capacity will be available to provide dollar funding for both term and overnight liquidity operations by the other central banks.

The FOMC has authorized increases in the existing swap lines with the ECB and the Swiss National Bank. These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $110 billion by the ECB, an increase of $55 billion, and up to $27 billion by the Swiss National Bank, an increase of $15 billion.

In addition, new swap facilities have been authorized with the Bank of Japan, the Bank of England, and the Bank of Canada. These facilities will support the provision of U.S. dollar liquidity in amounts of up to $60 billion by the Bank of Japan, $40 billion by the Bank of England, and $10 billion by the Bank of Canada.

All of these reciprocal currency arrangements have been authorized through January 30, 2009.


Read more: http://www.reuters.com/article/marketsNews/idINLI34528220080918?rpc=44

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(Federal Reserve: Not Copyright).

[Ghost Dog]

1. Bank of England Statement:

BoE statement on coordinated cbank money mkt action
Thu Sep 18, 2008 3:10am EDT
http://www.reuters.com/article/marketsNews/idINLI37911620080918?rpc=44&sp=true

LONDON, Sept 18 (Reuters) - Following is the full text of a Bank of England statement on coordinated central bank action to ease money market stress.

Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in US dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks will continue to work together closely and will take appropriate steps to address the ongoing pressures.

BANK OF ENGLAND ACTION

The Bank of England will offer to lend each day US dollar funds overnight against eligible collateral. The first such operation will take place today. The amount offered in each repo operation will initially be $40bn. This amount will be reviewed on a regular basis, in consultation with the other central banks.

The US dollar repo operations will take the form of an auction. Eligible collateral will consist of securities routinely eligible in the Bank's short-term repo Open Market Operations together with conventional US Treasuries.

The Bank of England has concluded a reciprocal swap agreement (swap line) with the Federal Reserve. Through this arrangement the Federal Reserve will provide the Bank of England with US dollar funding to facilitate these operations.

For more information please see the Market Notice published by the Bank today.

Information on related action to be taken by other central banks.

Information on the actions to be taken by other central banks is available on the following websites:

Bank of Canada (http://www.bankofcanada.ca/) Bank of Japan (http://www.boj.or.jp/en/) European Central Bank (http://www.ecb.int) Federal Reserve System (http://www.federalreserve.gov) Swiss National Bank (http://www.snb.ch/)

[Ghost Dog]

2. GLOBAL MARKETS-Stocks drop with fear rising; cash is king

Thu Sep 18, 2008 2:32am EDT

* Scramble for Treasuries pushes bill yields near to zero

* MSCI all-country world index at lowest since Nov 2005

* Morgan Stanley, WaMu reportedly on auction block

* U.S. investor 'fear barometer' at near 6-year high (Repeats to additional subscribers with no change to text) (Updates prices, adds quotes and comments)

HONG KONG, Sept 18 (Reuters) - Asian stocks fell, with shares outside Japan down 4 percent on Thursday, as emergency actions by central banks and governments around the world failed to ease a crisis that has investors fleeing to government bonds or sticking with plain cash.

European stock market futures STXEc1 FCEc1 FDXc1 were down slightly, pointing to at least a temporary staunching of three days of heavy selling.

But the seismic shift on Wall Street this week continued to create a sense of global panic, with frenetic consolidation in the financial sector in the world's largest economy, sending the MSCI all-country world stocks index .MIWD00000PUS to its lowest since November 2005.

Investors have piled into short-term U.S. Treasuries and bailed from money market funds, pushing yields down close to zero. The cost of insurance against default or restructuring in the credit default swap market soared to record levels in Asia, reflecting deep-seated unease. Continued...

/... http://www.reuters.com/article/marketsNews/idINLI28008720080918?rpc=44

[Ghost Dog]

3. Asia battles to shield markets from Wall St crisis

Thu Sep 18, 2008 2:36am EDT

Trading will never be the same.

* China drops repo funds in second policy easing this week

* Japan, Australia, India inject funds into money markets

* Overnight dollar rates ease to 6-8.5 percent.

* South Korea supplies dollars, signals cut in bond supply (Updates with S. Korea, China steps, changes dateline, byline)

SYDNEY/SHANGHAI, Sept 18 (Reuters) - Asian authorities poured more cash into money markets on Thursday and sprang to the defence of tumbling currencies, bonds and stocks to prevent upheaval on Wall Street from shattering regional confidence.

China relaxed policy for the second time this week, while Japan, Australia and India pumped a further $28 billion into money markets which nearly seized up after the collapse of Lehman Brothers and the nationalisation of U.S. insurer AIG.

South Korea sold dollars in the swap market and said it would try to halt the slide in bond prices, the Philippines intervened to support the peso, and Taiwan warned it could use a state fund to prop up stocks as markets whipsawed across the region facing it toughest test since the Asian financial crisis of 1997.

The Asian Development Bank urged the region's policymakers and regulators to get down to business now to shield the banks from the turmoil triggered by U.S. mortgage defaults that have inflicted more than $400 billion in losses and write-downs on Western lenders. Asian banks have largely escaped the worst of the losses from defaults on U.S. subprime home loans that have now escalated into Wall Street's worst crisis since the Great Depression and threaten to rupture the global financial system. Continued...

/... http://www.reuters.com/article/marketsNews/idINSP28308820080918?rpc=44

[Eurobabe]

4. DAX will be down

This is going to be a day to remember. Dow drops another 500? :shrug:

[Ghost Dog]

8. Outside UK, European markets have been among the calmest of the lot,

so far it seems.

DAX is steady-ish so far today:

[Eurobabe]

9. That's good news because the media here is pushing the German--> recession meme

They will talk the country into this fear.

[Ghost Dog]

13. Oil on troubled waters?

______

The dangerously dumb US media is responsible for a great deal of damage. And I'm not just talking economics.

[lapfog_1]

5. One thing about a "Global Economy"

is that you can have a Global run on the banks.

[Ghost Dog]

6. Fed insurance fund dwindling as crisis spreads from banks to govt

WASHINGTON, Sept 17, (AP): Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the American taxpayer may be the lender of last resort. The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the largest U.S. thrift, or another struggling rival fails, economists and industry analysts said Tuesday. Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co. Eleven federally insured banks and thrifts have failed this year, including Pasadena, California-based IndyMac Bank, by far the largest shut down by regulators. Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC’s insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

Confident

“We’ve got a ... retail bank run forming in this country,” said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics. Treasury Secretary Henry Paulson said Monday that the country’s commercial banking system “is safe and sound” and that “the American people can be very, very confident about their accounts in our banking system.” FDIC officials also have said 98 percent of U.S. banks still meet regulators’ standards for adequate capital.

But fear is growing on Main Street as well as Wall Street about the likelihood of multiple bank failures and the strain that would put on the FDIC.

The fund, which is marking its 75th anniversary this year with a “Face Your Finances” campaign, is at $45.2 billion — the lowest level since 2003. At the same time, the number of troubled banks is at a five-year high.

/continues... http://www.arabtimesonline.com/client/pagesdetails.asp?nid=22412&ccid=12

[Ghost Dog]

7. C.bank liquidity action calms investor nerves

Thu Sep 18, 2008 4:17am EDT

* MSCI world equity index steady at 296.27

* Global central banks unveil coordinated liquidity action

* Dollar overnight interbank rates fall; European stocks up

LONDON, Sept 18 (Reuters) - The cost of borrowing dollars short-term fell on Thursday and European stocks turned higher, halting a global equity selloff, after leading central banks unveiled concerted action to ease acute money market stress.

...

After the announcement, dollar overnight interbank rates indicated on Reuters <USDOND=> slid to 2 percent, compared with around 5.03 percent on Wednesday. Three-month interbank rates remained more than 250 basis points above expected U.S. interest rates.

"Any steps that help ease the liquidity problems, particularly ahead of end-quarter, are welcome," said Sean Callow, currency strategist at Westpac in Sydney.

"But markets know that central banks don't own a magic bullet, otherwise they would have used it already. And we've seen these sorts of steps before; it only addresses one of the symptoms of the underlying crisis."

In a volatile session, the FTSEurofirst 300 index rose 0.6 percent while MSCI main world equity index .MIWD00000PUS was up 0.1 percent, recovering after hitting its lowest level since November 2005.

"It is important to show that central banks among various countries are cooperating. That makes a psychological difference," said Tomoko Fujii, head of economics and strategy for Japan at Bank of America in Tokyo.

"But when you think about the reasons behind the losses, it is because housing prices are falling, and it is not as if such losses are going to disappear and the economy is going to improve tomorrow."

EXTREME FEAR

The dollar jumped 0.8 percent to 105.21 yen <JPY=> while it rose 0.15 percent .DXY against a basket of major currencies.

The December Bund future FGBLc1 was up 10 ticks, following a rally in safe-haven U.S. government bonds on Wednesday.

/... http://www.reuters.com/article/marketsNews/idINLI38443620080918?rpc=611&sp=true

[depakid]

10. World banks join forces to calm markets

World banks, led by the US Federal Reserve, are pumping an extra $US360 billion ($A450 billion) into global markets in a coordinated effort to avert a lock-up of the financial system.

The Fed, along with the central banks of Canada, England, Europe, Japan, and Switzerland, are auctioning off billions of US dollars to European banks in a move to ease the liquidity constraints brought on by the global credit crisis. The Reserve Bank of Australia is not participating in the cash infusion.

The move is in response to a chronic shortage of US dollars in Europe over the past few days, a source said. European banks have found themselves short of the US dollars needed to service US-dollar denominated short-term financing.

The effort to keep liquidity in the markets and businesses operating well is an "ongoing battle," the source said. "It's a bit like trench warfare during the First World War: at various stages progress appears to be made, then its seems to be given up again."

The US central bank opened up $US180 billion in swap lines needed for both term and overnight liquidity agreements by the other central banks. The European Central Bank will provide $US55 billon more, while the Swiss National Bank adds $US15 billion.

"In addition, new swap facilities have been authorised with the Bank of Japan, the Bank of England, and the Bank of Canada. These facilities will support the provision of US dollar liquidity in amounts of up to $US60 billion by the Bank of Japan, $US40 billion by the Bank of England, and $US10 billion by the Bank of Canada," the US Federal Reserve said in a statement.

More: http://business.smh.com.au/business/world-banks-join-forces-to-calm-markets-20080918-4jan.html
_______

We're all in this together, which is a pretty good sign that the smart people will soon be back in charge.

[TheWatcher]

11. Thank You For Posting all of this Ghost Dog

So Far here is the Futures Reaction to The "Road To Weimar" Announcement

S&P 500 +12.30 1175.20 9/18 5:12am
Fair Value 1158.31 9/17 10:38pm
Difference* +16.89

NASDAQ +19.50 1666.50 9/18 4:46am
Fair Value 1642.65 9/17 10:38pm
Difference* +23.85

Dow Jones +80.00 10744.00 9/18 5:11am

I suppose the fundamental question is, will this desperate attempt to reflate the system work? I'm sure we will be told once again by the Hooverian Carnival Barkers that "The Worst Is Over, Economy Is Sound Once Again.", but as far as what this will change, I am not sure.

I am beginning to doubt less and less by the day their ability to stave off the inevitable until the rest of us are all but insolvent, but this sounds like just another scheme that will not solve the problem, only assist in masking the symptoms for a bit longer.

I'd be interested to hear your take on what all this means for the short and longer term.

Attention all Planets of the Solar Federation
Attention all Planets of the Solar Federation
Attention all Planets of the Solar Federation
We have assumed control.
We have assumed control.
We have assumed control.

[JCMach1]

12. Central Banks Offer Extra Funds to Calm Money Markets (Bloomberg)

The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the 1920s.

The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' The Bank of England, the Bank of Canada and the Swiss National Bank also participated... The Fed will spray the dollars around the world via swap lines with other central banks who can then auction them in their own markets. The ECB, Bank of England and Swiss National Bank allotted a total of $64 billion for one day today.

Under the new arrangements, the ECB can now double its existing limit of dollars it gets from the Fed to $110 billion and Switzerland's central bank can offer $27 billion, an extra $15 billion. New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively. The arrangements are authorized until Jan. 30.

The ECB said it would offer $40 billion ``for as long as needed'' in overnight funds to the region's banks. It will also increase by $5 billion to $25 billion the amount it sells for 28 days and to $15 billion what it auctions over 84 days. The Swiss National Bank will boost its 28-day auctions to $8 billion and the 84-day offering to $9 billion. Both were previously $6 billion.

Use as Needed

The Bank of Canada said it has decided not to draw on its $10 billion swap facility at this time. The Bank of Japan, whose policy board held an emergency meeting today, said it will use its $60 billion as required by market conditions.

In auctions of their own currencies, the ECB today awarded 25 billion euros in one-day money and the Bank of England 66.2 billion pounds in one-week loans.

The action is the latest attempt by central bankers to coordinate their response to the financial crisis. In December, they joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending. The Fed increased its swap line with the ECB in July.

The announcement boosted European shares and U.S. futures, which have been pummeled this week as contagion spread through financial markets. Europe's Dow Jones Stoxx 600 Index, which has dropped 8 percent, gained 0.8 percent to 260.15. Futures on the Standard & Poor's 500 Index added 1.2 percent. More than $19 trillion has been wiped off the value of global stock markets since Oct. 31... http://www.bloomberg.com/apps/news?pid=20601103&sid=aW2z_iiBnF2E&refer=news