Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Pause Should Extend - 21st April 19
Why Gold Has Been the Second Best Asset Class for the Last 20 Years - 21st April 19
Could Taxing the Rich Solve Income Inequality? - 21st April 19
Stock Market Euphoria Stunts Gold - 20th April 19
Is Political Partisanship Killing America? - 20th April 19
Trump - They Were All Lying - 20th April 19
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Central Banks Announce Unlimited Borrowings

Politics / Credit Crisis Bailouts Oct 14, 2008 - 04:43 AM GMT

By: Mike_Shedlock

Politics

Best Financial Markets Analysis ArticleStocks soared today as Europe, the US, and in fact Central Bankers everywhere "let it all hang out". Please consider Europe puts more on the line for banks than US .

Europe put $2.3 trillion on the line Monday to protect the continent's banks, a figure that dwarfs the Bush administration's $700 billion rescue program, in its most unified response yet to the global financial crisis after a stumbling start.


The pledges by Britain and the six countries that use the euro helped soothe stock markets, along with a promise by top central banks to provide unlimited short term dollar credits.

The action by Germany, France, the Netherlands, Spain, Portugal, Austria and Britain came after weeks in which the governments often acted at cross purposes and sniped at each other -- a piecemeal approach that failed to stop steep and frightening slides on financial markets.

"The time of each one for itself is fortunately over," French President Nicolas Sarkozy said, following a Cabinet meeting that approved France's spending in the framework of the plan.

"United Europe has pledged more than the United States," added Sarkozy, who has taken a lead in getting the cooperation.

Europe's biggest economy, Germany, put together a rescue package worth as much as $671 billion to shore up the country's financial system. "We are taking drastic action, no question about it ... so that what we have experienced is not repeated," Chancellor Angela Merkel said.

Sarkozy said the French government would provide up to $491 billion to help banks, most of that in guarantees for bank refinancing. The Netherlands put up $273 billion to guarantee interbank loans.

Austria's government offered up to $116 billion. Spain said it would guarantee up to $135 billion in a bank bond issuance this year. Portugal guaranteed $27 billion -- nearly 12 percent of annual GDP -- to encourage its banks to lend to each other.

Italy did not earmark a specific amount but Finance Minister Giulio Tremonti said the government would offer "as much as necessary."

The European moves are modeled on Britain's $88 billion plan to partly nationalize major banks. Prime Minister Gordon Brown has also promised to guarantee a further $438 billion worth of interbank loans to restore confidence in the financial sector.

U.S. Set to Buy Preferred Stock in Nine Top Banks

The Wall Street Journal is reporting U.S. Set to Buy Preferred Stock in Nine Top Banks .

The U.S. government is set to buy preferred equity stakes in nine top financial institutions as part of its new comprehensive plan to tackle the credit crisis, according to people familiar with the situation.

It's unclear how much would be invested in each institution. The move is designed to remove any stigma that might come with a government investment.

Not all of the banks involved are happy with the move but agreed under pressure from the government.

The dramatic moves are part of a new wide-ranging effort to restore confidence to the battered banking system, following similar moves by European governments that sent global stock markets soaring.

The U.S. initiatives will likely supersede many of the government's previous efforts. They are being formulated jointly by the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp., and ensure that the U.S. banking sector will be tied to the federal government for years to come.

One central plank of these new efforts is a plan for the Treasury to take approximately $250 billion in equity stakes in potentially thousands of banks, according to people familiar with the matter, using funds approved by Congress through the $700 billion bailout bill.

In addition, the FDIC is expected to temporarily extend its backstop from bank deposits to new funds raised by banks and thrifts for three years. That would be an aid to companies that have had a hard time raising capital without government assistance.

The FDIC is also expected to temporarily lift the insurance limits for non-interest bearing bank deposit accounts. This would extend beyond the $250,000 limit per depositor that lawmakers agreed on two weeks ago. The shift brings U.S. policy more in line with other countries that have offered blanket deposit insurance to try and prevent customers from withdrawing large sums of money from financial institutions.

Unlimited Borrowing

Earlier today the Fed Announced Unlimited Borrowing . To which I responded Essence of the "Rescue" Plan .
To stimulate lending, the bailout plan will attempt to recapitalize banks. The method of recapitalization is best described as robbing Taxpayer Pete to pay Wall Street Paul. In essence, money is taken from the poor (via taxes, printing, and weakening of the dollar) and given to the wealthy so the wealthy supposedly will have enough money to lend back (at interest) to those who have just been robbed.

I can guarantee in advance that the unforeseen consequences of whatever decisions they make, simply will not be any good. Besides, it is axiomatic that plans to rob Peter to pay Paul, can never really work in the first place, regardless of how much time is spent crafting them. The Hombres - Let It Out (Let It All Hang Out)



The central bank response to the credit crisis was to "let it all hang out". Unfortunately, we are in this mess in the first place because central banks everywhere, led by the Greenspan Fed, "let it all hang out".

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules