We're in a surreal phase. As Denninger points out, there is no legal authority for the Federal Reserve to accept stocks and shares as collateral, which it is now doing ("was that a wooden horse that came in through the gates?"). There is an air of unreality - huge firms suddenly going down, one by one, while we're trying to make ourselves believe that it's all still normal, somehow.
And now that Lehman has bitten the dust, we shall see whether London Banker was right - whether Lehman was calling in foreign investments in order to give US domestic creditors an unfair share in the asset recovery scramble.
9 comments:
Denninger. wow
Mr Greenspan is really quite old; they'll have to get a move on if they want to hang the bugger.
Greenie's now doing the rounds on TV today telling us that this is a "once in a hundred year" financial crisis. For a senile geriatric I'd say his incision and perception is quite sharp, and I can only assume that it's alzheimers that makes him forget that he's largely responsible for this meltdown.
Yes, there certainly is an air of unreality about it all. The Savings and Loan crisis was estimated to have cost the US economy $160billion. This crisis is 6 times bigger - even with conservative estimates. The S&L crisis sparked the 1990 recession, but this crisis will be 6 times bigger.
The FED statement actually reads . . .
"The collateral eligible to be pledged at the Primary Dealer Credit Facility (PDCF) has been broadened to closely match the types of collateral that can be pledged in the tri-party repo systems of the two major clearing banks. Previously, PDCF collateral had been limited to investment-grade debt securities."
In the context of the statement it seems clear (to me anyway) that "securities" in this context = "fixed income securities"
Hi, Ryan and DB. Time to keep our heads down, I guess.
As I have posted in a few places, I can't wait for them to start accepting crap (literally). I'm holding in a big steamer to squat out as collateral when they are ready for it. :)
Soon they'll be lending against slightly used toner cartridges.
There is an air of unreality - yes, a strange undertone to it all.
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