The way I figure it, the "What We Do" page on the Fed's internet site may soon be the longest one of the bunch.
Yesterday (Sept. 29) the Fed "significantly expanded" the billions of dollars it makes available to other central banks. And it did mean "significantly" -- to the tune of $630 billion. The liquidity crisis is reportedly so acute that the interbank dollar borrowing rate outside the U.S. had gone through the roof. So, the Fed beefed up yet another one of its recently created facilities (Term Auction Facility), in this case to allow central banks to "swap" their respective currencies for dollars.
Then there's the Primary Dealer Credit Facility, created this past March after the collapse of Bear Sterns. That facility may have reached a new height of activity two weeks ago in the wake of the Lehman Brothers bankruptcy on Sept. 15 -- The Wall Street Journal ran a page one story (Sept. 29) about this, which included this sentence about what happened on the weekend before the bankruptcy:
"Fed officials worked furiously through Sunday [Sept. 14] to expand that facility, allowing banks to put up as collateral for loans a wider range of securities, including stocks."
Yes, that said "stocks." The Federal Reserve lets banks put up shares of stocks as collateral for loans -- note as well the word "including." Including what, exactly?
Nothing I've found answers that question, because statements from the Fed at the time didn't even include stocks among the "wider range" of what it allowed: it said only that "eligible collateral for...auctions will now include all investment-grade debt securities."
Last time I looked, stocks ain't debt securities.
I will agree that a word like "Facility" sounds so much more, well, fiduciary... even if a descriptive phrase like "Come and get it!" is arguably more precise. Thing is, every time the Fed makes the credit window bigger the list of banks still around to use it gets smaller.
There's a lot to keep up with -- perhaps the hardest part is recognizing what to focus on. From that practical perspective alone, nothing in print today can "do the recognizing for you" like Bob Prechter's Elliott Wave Theorist and The Elliott Wave Financial Forecast. These publications can be on your computer screen in minutes: click here to learn more.
$138 Billion Inferences Update
The WSJ story I mentioned above explains how the Fed and Treasury badly underestimated the "dire" effect of Lehman's bankruptcy would have in world credit markets. Yet, nowhere does that story even mention the $138 billion chain of transfers from J.P. Morgan to Lehman and from the Fed to J.P. Morgan.
Today I reviewed all Open Market Operations listed by the New York Fed for September 14-16. Several operations included dollar amounts far larger than what looks typical for other dates, but no amounts correspond to the $138 billion. I have yet to receive my call backs from the New York Fed and Washington, DC Fed.
Stay tuned.