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Fed:central Banks Should Consider Making Emergency Liquidity Programs Permanent

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Some Bank Assistance Should Be Permanent: Fed Staffer

Published: Friday, 21 Aug 2009 | 1:29 PM ET Text Size By: Reuters

Central banks should consider making some of their existing emergency liquidity programs permanent to minimize the stigma of accessing central bank credit, a top Federal Reserve board staffer said Friday.

"They should consider whether some now-existing arrangements such as the Term Auction Facility and similar mechanisms, need to be adapted and made permanent, or new facilities established, so that the stigma of using central bank credit is minimized, especially in future crises," Brian Madigan, director of the Fed's Division of Monetary Affairs, said in remarks prepared for deliver to a conference.

The Fed uses its discount window to lend directly to banks, but some firms are wary of tapping it on concern it will be perceived as a sign of weakness.

"The problem of discount window stigma is real and serious," Madigan said. "The intense caution that banks displayed in managing their liquidity beginning in early August 2007 was partly a result of their extreme reluctance to rely on standard discount mechanisms."

The TAF was introduced in December 2007 to help ease a funding crunch in the interbank market as the financial crisis gathered steam. It was aimed at making it easier for banks to borrow from the Fed anonymously and over longer periods.

Madigan also argued that central banks should have the ability to lend to important non-bank firms that are subject to bank-like runs.

"Like banks, their interconnectedness with other parts of the financial system, as well as their similarities to one another and to other types of financial institutions, makes contagion possible," he wrote.

In addition, individual firms that are not big enough to be systemically important in and of themselves can also warrant access to central bank lending, Madigan added.

Money funds, for example, experienced bank-like runs in October 2008 as investors rushed to redeem their holdings. A number of them facing redemptions at the same time can pose a risk to the system.

"A means of lending in contingency situations even to nonbank firms that may not be systemically critical in themselves would seem necessary to promote a suitable degree of financial stability," he said.

A regulatory regime should include a mechanism for central banks to extend credit in a crisis to entities that are not normally able to borrow from the central bank, Madigan said.

"No reasonable system of regulation can draw a bright line that cannot be crossed between banks and nonbanks," he said.

http://www.cnbc.com/id/32509147

LOL

The "real" bank balance sheets must be a fooking disgrace if they can't even remove the emergency measures for the forseeable future.

What a sham.

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LOL.

Well, to be honest, QE has been a permanent fixture for decades now. The money supply has been increasing at silly rates.

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They can't stop now, that's the problem.

Just like a junky they will have to increase the dosage.

They are preparing for the Option arm and Alt A implosions arent they?

Thing is, its still a loan. This is going to grag down bank profits for a decade at least.

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They are preparing for the Option arm and Alt A implosions arent they?

Thing is, its still a loan. This is going to grag down bank profits for a decade at least.

Bingo. Plus the CRE implosion which has just started.

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And all to save the bankers.

Why doesn't the Fed lend direct to the people and cut out the other parasites?

And who would feed the Queen Bee parasite?

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http://business.timesonline.co.uk/tol/busi...icle6805430.ece

UK and US stock markets rallied today and oil soared to a year-high after Ben Bernanke, chairman of the Federal Reserve, said prospects for economic recovery “appear goodâ€.

London’s FTSE 100 index added 2 per cent or 94.31 points to close at 4,850.89, its fourth straight day of gains and trading above 4,800 for the first time since October 12, 2008.

In New York, the Dow Jones industrial average rose by 1.41 per cent or 132.25 points to 9,482.30 at 12.40pm in New York after Mr Bernanke’s comments emerged in a speech in the annual central bankers’ retreat in Jackson Hole.

Mr Bernanke said: “After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good.â€

However, the US Fed chairman cautioned: “Although we have avoided the worst, difficult challenges still lie ahead.â€

Mr Bernanke said continuing losses at financial institutions and difficulty for both companies and consumers in obtaining credit remain a concern.

"Because of these and other factors, the economic recovery is likely to be relative slow at first, with unemployment declining only gradually from high levels," Mr Bernanke said.

He said that the global crisis would have been far worse if governments and central banks had not taken "speedy and forceful actions" to prop up the economy.

Now they must urgently address the weaknesses in the financial system that allowed the crisis to occur, he said.

The Fed chairman added: "We must work together ... to build a new financial regulatory framework that will reflect the lessons of this crisis and prevent a recurrence of the events of the past two years."

So we need emergency funding but recovery prospects are good!!!!!

Doublethink in action?

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http://www.telegraph.co.uk/finance/finance...-recession.html

Fed's Ben Bernanke says global economy 'beginning to emerge' from recession

Federal Reserve chairman Ben Bernanke has boosted hopes that the global economy is emerging from recession after he told a congress of central bankers that the outcome of the downturn could 'have been decidedly worse.'

Mr Bernanke, head of the US central bank, believes that prospects for a return to growth in the near-term appear good in both the US and abroad.

Although he believes that that recovery will be “relatively slow†at first, he also argued that the worst of the recession is now over.

Speaking in front of fellow central bankers from around the world at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming, Mr Bernanke focussed on the events since the financial downturn began in August 2007, in particular the unprecedented events of the last 12 months.

Calling the collapse of Lehman Brothers and the near-collapse of insurer AIG “dramatic but hardly isolated events,†he also touched on the problems that impacted the European banking system, not least HBOS’s forced merger with Lloyds TSB and the UK nationalisation of Bradford & Bingley.

He noted that although authorities “moved quickly to respond†to that phase of the crisis, strains still persist in many parts of the financial marketplace around the world.

The Fed chairman warned that as a result of those strains and other factors, “economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels.â€

Looking to the future, Mr Bernanke said that central banks, governments and regulators must “urgently address structural weaknesses in the financial system, particularly in the regulatory framework, to ensure that the enormous costs of the past two years will not be borne again.â€

He argued that the role of liquidity is key to such reform, saying a “more system-wide or macro-prudential approach to regulation is needed,†with the latter focussing on the inter-dependencies between firms and markets that have the potential to undermine the whole financial system.

This is doublethink at it's finest.

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http://business.timesonline.co.uk/tol/busi...icle6805430.ece

So we need emergency funding but recovery prospects are good!!!!!

Doublethink in action?

This is an interesting choice of words from Benny:

"the prospects for a return to growth in the near term appear good"

Double%20dips.png

Replace the "swizzle" stick with a "swindle" stick and there you have it. :rolleyes:

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This is an interesting choice of words from Benny:

"the prospects for a return to growth in the near term appear good"

Fed speak, for the recovery will last until years end and then turn into a giant turd?

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Fed speak, for the recovery will last until years end and then turn into a giant turd?

Yep. Ben knows what happens next year when the stimulus, cash for clunkers, dollars for dishwashers etc has run the course.

I think the extreme government spending and stimulus schemes will turn UK/US GDP positive for the next 2 or 3 quarters and then the GDP will fall back into recession towards the middle of next year when they run out of money and can't print more due to inflation fears.

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Yep. Ben knows what happens next year when the stimulus, cash for clunkers, dollars for dishwashers etc has run the course.

I think the extreme government spending and stimulus schemes will turn UK/US GDP positive for the next 2 or 3 quarters and then the GDP will fall back into recession towards the middle of next year when they run out of money and can't print more due to inflation fears.

It does appear that they will engineer a recovery by printing funny money.

I hope it's not a 3 quarter recovery as the idiot in number 10 might engineer a political recovery.

I'm beginning to feel it will turn after again now after Christmas, considering how the FTSE is going it might have managed to recover to 6500 mark.

For the moment it appears that they have created a new economic paradigm.

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It does appear that they will engineer a recovery by printing funny money.

I hope it's not a 3 quarter recovery as the idiot in number 10 might engineer a political recovery.

I'm beginning to feel it will turn after again now after Christmas, considering how the FTSE is going it might have managed to recover to 6500 mark.

For the moment it appears that they have created a new economic paradigm.

They have!

Ben's just faxed it through............

neweconomicparadigm.jpg

post-9973-1250885797_thumb.jpg

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For the moment it appears that they have created a new economic paradigm.

I have been wondering about this for a while. The more news like this comes in the more I think that we have just reached the 'third way'.

Not communism, not capitalism.

We have competition for us lower caste to ensure wages are suppressed but communism at the top. The free world has finally been put to rest, an oligarchy at the top now decides via special drawing rights and permission to print what the world buys and which companies prosper.

This month the car industry, next month washing machines with the special government program to support it.

The default ideology has failed beyond a doubt, only blatant fraud is keeping it going for pretenses. The existing lot seized control and agreed a global command economy, making us grateful for their swift action to 'save the world'.

:angry:

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I have been wondering about this for a while. The more news like this comes in the more I think that we have just reached the 'third way'.

Not communism, not capitalism.

We have competition for us lower caste to ensure wages are suppressed but communism at the top. The free world has finally been put to rest, an oligarchy at the top now decides via special drawing rights and permission to print what the world buys and which companies prosper.

This month the car industry, next month washing machines with the special government program to support it.

The default ideology has failed beyond a doubt, only blatant fraud is keeping it going for pretenses. The existing lot seized control and agreed a global command economy, making us grateful for their swift action to 'save the world'.

:angry:

If this is what's happening how long can this be kept up? However there are a lot of VI that would be quite happy with this.

The stock markets appear very happy with the new arrangement.

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