Tick Tick Tick
central banks led by the Federal Reserve lowered the cost of emergency dollar funding for financial companies in a global effort to ease Europe’s sovereign-debt crisis. The new interest rate is the dollar overnight index swap rate plus 50 basis points, a half percentage-point cut, and the program was extended by six months to Feb. 1, 2013, the Fed said today in a statement in Washington. The Fed coordinated the move with the European Central Bank as well as the Bank of Canada, Bank of England, Bank of Japan, and Swiss National Bank…Two hours before the Fed announcement, China cut the amount of cash that the nation’s banks must set aside as reserves for the first time since 2008. The level for the biggest lenders falls to 21 percent…
The six central banks also agreed to create temporary bilateral swap programs so funding can be provided in any of the currencies “should market conditions so warrant.” Those swap lines were also authorized through Feb. 1, 2013…
While today’s move by the six central banks is likely to ease tensions in money markets, it falls short of some calls for the ECB to step up and act as lender of last resort for the governments of the 17-member euro area and buy unlimited amounts of government bonds. Germany, Europe’s largest economy, has resisted the idea, arguing it isn’t the ECB’s job to do so and would only be a temporary fix…
The cost for European banks to fund in dollars rose to the highest levels in three years today as concerns about a possible breakup of the euro area increased after leaders said they’d failed to boost the region’s bailout fund as much as planned…Jens Sondergaard, senior European economist at Nomura International Plc in London. “But are liquidity injections a game changer when the heart of the problem is in European sovereign debt markets?”
The action by the central banks was meant to address the interbank funding issues discussed the other day by Oliver Sarkozy. Whether it is enough remains to be seen, and of course these actions do nothing to solve the sovereign debt issue, said to require a $3 trillion solution which is less than half funded at this point.
December 1st, 2011 at 4:50 am
From Forbes, a speculation:
“Did a big European bank come close to failing last night? European banks, especially French banks, rely heavily on funding in the wholesale money markets. Given the actions of the world’s largest central banks last night, it raises the question of whether a major bank was having difficulty funding its immediate liquidity needs.
The Federal Reserve, the Bank of England, European Central Bank, the Bank of Japan, the Swiss National Bank, and the Bank of Canada in a coordinated action moved to provide liquidity to the global financial system.”
http://www.forbes.com/sites/greatspeculations/2011/11/30/big-european-bank-failure-averted-what-central-banks-did-not-tell-us
Tick Tick Tick. A trenchant title for the post, Dinocrat.
One wonders for how long printing money will keep the world financial system afloat?
December 1st, 2011 at 9:12 am
they say these are just short term loans to keep the system “greased”, so things don’t seize up. I guess we get these cheap loans back?
But keeping them liquid isn’t the same as solvent … is it? Does the IMF or some white knight still need to ride in with $3 trillion?