weekend commentary - US taxpayers now backstopping shaky auto and credit card loans !
(snip)"NEW YORK (MarketWatch) -- The Federal Reserve, along with other central banks, said Friday that it was increasing the funding it is providing to banks and announced that, for the first time, it was willing to accept bonds backed by auto loans and credit cards.
"In view of the persistent liquidity pressures in some term funding markets, the European Central Bank, the Federal Reserve and the Swiss National Bank are announcing an expansion of their liquidity measures," the Fed said in a statement.
The Fed took the move in an attempt to flood the market with supply and lower short-term lending rates, such as the London interbank offered rate, or Libor.
The U.S. central bank announced an increase, to $75 billion from $50 billion, in the amounts auctioned to eligible depository institutions under its biweekly Term Auction Facility, beginning with the auction on May 5.
This increase will bring the amounts outstanding under the TAF to $150 billion.
The move to expand the TAF was widely anticipated because of strong demand for loans through the program.
"The program is now reaching a magnitude where it can play a significant role in plugging the gap between the remaining demand for unsecured term funding in the bank market and the latest decline in supply following the run on Bear Stearns," wrote Lou Crandall, chief economist for Wrightson ICAP.
The expansion was "probably marginally disappointing because there was a widespread expectation ... that the Fed would extend the term of at least some TAF auctions to three months," wrote Stephen Stanley, chief economist for RBS Greenwich Capital.
The TAF, announced on Dec. 12, was followed in March by the creation of several other Fed lending programs targeted at different sectors of the credit markets.
All told, the Fed has now offered to lend up to $462 billion in cash and Treasurys to the markets, in addition to the nearly unlimited funds available through the discount window and the primary credit dealer facility. "(snip)
Re: weekend commentary - US taxpayers now backstopping shaky auto and credit card loa
So your favorite Swiss Bank is involved too. Are you going to short Swiss Franks then?
Re: weekend commentary - US taxpayers now backstopping shaky auto and credit card loa
^^^ I'm long the Swissie actually. At least the Swiss National Bank (or swiss commercial banks for that matter) aren't flaky enough to start handing out freshly printed Francs in exchange for 'bundled' subprime auto and credit card debt that is virtually guaranteed to generate bigger losses / writeoffs than income, as the US Fed has just started doing @!!! Unlike the recent US Fed, the Swiss National Bank follows strict rules in regard to which types of financial institutions are eligible for 'discount window' borrowing, and what type/quality of collateral they must post.
Of course there are logical reasons for this too ... the vast majority of Swiss voters actually pay income taxes, which is arguably no longer the case in America. The vast majority of Swiss citizens are savers (and expect to EARN interest), while the majority of US citizens now owe more than they are worth (and expect to pay interest, or go bankrupt and let the US taxpayers pick up their tab).
Re: weekend commentary - US taxpayers now backstopping shaky auto and credit card loa
Quote:
Originally Posted by
Melonie
^^^ I'm long the Swissie actually. At least the Swiss National Bank (or swiss commercial banks for that matter) aren't flaky enough to start handing out freshly printed Francs in exchange for 'bundled' subprime auto and credit card debt that is virtually guaranteed to generate bigger losses / writeoffs than income, as the US Fed has just started doing @!!! Unlike the recent US Fed, the Swiss National Bank follows strict rules in regard to which types of financial institutions are eligible for 'discount window' borrowing, and what type/quality of collateral they must post.
Of course there are logical reasons for this too ... the vast majority of Swiss voters actually pay income taxes, which is arguably no longer the case in America. The vast majority of Swiss citizens are savers (and expect to EARN interest), while the majority of US citizens now owe more than they are worth (and expect to pay interest, or go bankrupt and let the US taxpayers pick up their tab).
* What about Productivity? All the above are incomplete when the biggest factor influencing the Wealth of a Nation and ultimately its exchange rates is productivity.
* What about Demographics? The second biggest influence
* What about Innovation? The third biggest influence. Where is the Silicon Valley
* What about Entreprenuership?
Idiot web-sites focus on useless things which matter only 1% in the long run. Short term there are a million variables and Idiot analysis can't be comprehensive in that aspect too.
Re: weekend commentary - US taxpayers now backstopping shaky auto and credit card loa
I'll boil down the Swiss case to the top five Swiss industries ... high end firearms. high end timepieces, high end chocolate, high end jewelry, and exotic chemicals. All generate tremendous amounts of added value !!! Obviously the Swiss are very well positioned for service industries as well i.e. Swiss Banks and tourism, which is overwhelmingly funded by NON-Swiss currency out of the pockets of rich foreigners. In other words, very little velocity in the Swiss economy is derived from Swiss residents trading services with each other - which is a very different situation from America.
All of these lead to a Swiss demographic of high per capita earnings per citizen, which results in saving / investing instead of borrowing. The Swiss also have the toughest laws in Europe in regard to immigration of low skill level foreigners ( see ) which virtually guarantees that every legal Swiss resident is a high earning taxpayer, and that every illegal Swiss resident is promptly deported.
Circling back on topic, this means that the Swiss National Bank does not have to worry about making good on car loans or credit card loans granted to low income Swiss residents and/or illegals, who have little means to pay such loans back. This is the exact opposite situation than America, where car loans and credit card loans granted to low income US residents AND illegals are defaulting in droves, because many low income Americans simply don't have the means of paying such loans back, and because many illegals have no reason whatsoever to pay such loans back.
Originally, low income Americans and illegals defaulting on car loans and credit card loans were the problem of American banks and investors who provided the capital for those loans. However, thanks to recent Fed rule changes, these defaults are NOW the problem of the US taxpayer - because the Fed is accepting these shaky loans as (face value) collateral onto its books, and paying the American banks freshly printed US dollars in return.