No, it’s not clickbait.

Steve S. wrote and referred me to this article – linked for your convenience – $2.93 trillion. In a nutshell, this is the situation:

Last Thursday, December 12, the New York Fed announced that over the next month it would shower the trading houses (primary dealers) on Wall Street with a total of $2.93 trillion in short-term loans. The money is for a Wall Street liquidity crisis that has yet to be explained in credible terms to the American people.

The New York Fed’s repo (repurchase agreement) loan program began on September 17 when repo loan rates spiked from approximately 2 percent to 10 percent – meaning either liquid funds were not available to loan or the mega banks on Wall Street were backing away from lending to certain counterparties. Repo loans are typically between banks, hedge funds and money market funds on an overnight basis and are made against good-quality collateral. Since that time, the New York Fed has been making these loans to the tune of hundreds of billions of dollars weekly.
Liquidy problems don’t NECESSARILY equate to a crisis through the use of derivative financial instruments if you can hold to maturity. (read more about the Orange County CA Bankruptcy, which was a liquidy crisis on steroids) I ran the investigation that involved broker dealers and bond traders and as a result, I do know what a double step-down, inverse floating rate note based on Swiss LIBOR is. There are things you learn in life that are difficult to purge.
My take on the article is that somebody is leveraged in the wrong direction to the tune of $3 trillion and the Federal Reserve is trying to save them and save the market as it now exists. But the devil is in the details, isn’t it?

The $2.93 trillion that the New York Fed will funnel to Wall Street over the next month consists of up to $120 billion each weekday in overnight loans through January 14 and $440 billion in term loans ranging from 3-days to 32 days. In addition, during the last week of the year (on Tuesday, Wednesday and Thursday) the Fed will bump up its overnight loan offerings to $150 billion from $120 billion, thus providing an additional $90 billion that week.

Whatever it is, it’s a real mess, and it will drag all of you (and the nation and the world) along with it. If it’s the liquidy crisis that I suspect it is, there is a way to fix it without crashing the economy, but it’s touchy.  Fredd, what do you think?


  1. I do know what a double step-down, inverse floating rate note based on Swiss LIBOR is. There are things you learn in life that are difficult to purge.

    So you're saying there are things that once seen can't be unseen?

  2. A logical question would be how much of that "liquidity" is being siphoned away into private privileged pockets….or is being used to replace cash that has been squirreled away by insiders. As the old aphorism goes you can steal FAR more money with a briefcase than you ever could with a gun….and get away with it.

  3. Ah, the old repo issue resurfaces. Some argue that a catastrophic liquidity crisis is the next step in the thus far failed coup.

    Others again argue that our money is rotten.

    Perhaps both are true.

  4. Funny money games that will someday drag us all down. I'm not knowledgeable about these matters. Don't own stocks, bonds, or any kind of funds. What cash I have goes into a Credit Union, not a commercial bank.

  5. LL: Please allow me to highjack your comments section to reply to Fredd.

    Fredd: How very noble and generous of you to overlook my very accurate observation of your site. You may be feeling all righteous and swell about yourself, but that was one of the most bullscat arguments I have ever read or heard.

    LL: If you do not feel that this comment should appear on your blog, I will understand. If you allow this rant, thank you.

    Paul L. Quandt

  6. I'm not familiar with the genesis of the conflict between you and Fredd.

    Fredd is knowledgable when it comes to some of these financial matters.

  7. I can't say. There are few details in the public domain but the mainstream and Wall Street media are scrupulously ignoring the situation. If it's a liquidity issue, the Fed is issuing what is (simplified) essentially a bridge loan and that might be all that it takes.

    The facts are very closely held.

  8. The salary plus bonus will go into many pockets, but we're talking trillions here, and even one trillion is such a vast number that I, for one, have a difficult time conceiving it in real terms. Like a trillion in gold would be like having Mt. Everest in gold.

  9. It is my understanding banks can take your deposits to save their asses and there is nothing you can do about it. Credit unions operate under different rules.

  10. Well, I only know ( for certain values of ' know ' ) Fredd through his blog. I ran up against one of his blog rules and became huffy. As I vowed to never again darken his blog's doorway, and having seen that he comments on your blog, I imposed upon your generosity to reply to him here. This also may be deleted at your discretion ( about which, it ought to go without saying ). In any case, I am somewhat of a stiff neck and sometimes play ( although I fear that it is not an act ) the fool.

    Thank you for your indulgence.
    Paul L. Quandt

Comments are closed.