Fed Lending Going Berserk to Distressed Banks
Companies / Credit Crisis 2008 Sep 01, 2008 - 01:29 PM GMT
Anthony lives in Tokyo — thirteen time zones and 7,400 miles away.
Typically, we talk via instant messenger or computer video-chat. And I must admit that's a lot better than snail mail or ham radio (the way Elisabeth and I often had to communicate 40 years ago).
Either way, it's still not the same as being in the same place.
Fortunately, though, right now, Anthony's here for a short visit. So we want to take full advantage of some quality time together. And I assume that, on this holiday weekend, you may like to spend time with loved ones as well.
The urgency of protecting them, however, has not subsided. Quite to the contrary, right now, the Fed's lending to distressed institutions is going berserk.
Here's the picture in a nutshell:
For most of the decade, banks largely avoided borrowing from the Fed. There was plenty of cheap money available elsewhere. They had little reason to submit to the extra scrutiny that it required. And there was little stress in the banking system.
Now, all that has changed.
Now, borrowing at the Fed's discount window has surged — from a weekly average of a meager $1 million per day at its low point last year to a weekly average of $18,469 million per day last week.
What would be the growth rate of an explosion of that magnitude? "Only" 1.7 MILLION percent — not exactly a sign of stability in our financial system.
The fact is the Fed's lending is going berserk, a blatant indicator of severe stress and more big troubles ahead for banks.
Do not underestimate the danger. Take the protective action we recommended in our recent video before it's too late.
Good luck and God bless!
Martin
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