Discount Window Lending Soars to Another Record

American Banker
Discount Window Borrowing Hits Another Record
By Steven Sloan
October 3, 2008

WASHINGTON — For the third consecutive week, lending through the Federal Reserve Board's discount window continued to soar, hitting a new record on Wednesday when total borrowing reached $409.5 billion.

The new high underscores the industry's struggle to regain its footing during the past week amid a financial crisis that toppled Washington Mutual Inc. and caused regulators to facilitate the sale of Wachovia Corp.

Much of the lending was concentrated in the Fed's backstop for money market mutual funds and the primary dealer credit facility. The Fed said it distributed $152.1 billion — more than twice the level a week earlier — through a program announced last month that lends against asset backed commercial paper held by the funds.

Meanwhile, borrowing through the primary dealer credit facility, established in March to lend to investment banks, jumped 38.7%, to $146.6 billion. Though major standalone investment banks no longer exist on Wall Street, the facility helps Goldman Sachs and Morgan Stanley, which are now bank holding companies, and the investment bank units of commercial institutions.

Traditional lending in the form of primary credit to commercial banks also reached a new high on Wednesday, when borrowing increased 26%, to $49.5 billion.

The Fed also said American International Group Inc., which the central bank bailed out last month, had tapped $61.3 billion of its $85 billion loan. A week ago, the insurance giant had borrowed $44.6 billion of the loan.

For the first time in three weeks, there was no lending to weak banks in the form of secondary credit and the remaining $42 million was in the form of seasonal credit to support banks in rural or resort regions.

The Fed's loans are carrying increasingly longer maturity terms. While the vast majority — $213.7 billion — will mature within 15 days, $61.3 billion will come due within one to five years. Another $21.3 billion matures between 91 days and one year while the remaining $113.2 billion will be paid within 16 to 90 days.

The Fed continues to expand its balance sheet to accommodate the growing demand at the discount window. Total assets jumped 23.5% in the past week, to $1.5 trillion.

KfW Dismisses Managers Responsible for Lehman Transfer

Too bad these herren did not work in the States for an American bank. They would have received huge bonuses and golden parachutes.

Reuters
KFW fires two board members over Lehman transfer
by Philipp Halstrick
Mon Sep 29, 2008 5:43am EDT

BERLIN, Sept 29 (Reuters) - German state lender KfW has fired two board members over the transfer of around 300 million euros to Lehman Brothers on the day the U.S. bank filed for bankruptcy, the finance and economy ministries said on Monday.

KfW's board of supervisory directors decided that Peter Fleischer and Detlef Leinberger would have to leave their posts with immediate effect, the ministries said in a statement. The two board members had already been suspended.

KfW has said it mistakenly transferred the funds to Lehman to unwind a swap agreement, in which two counterparties agree to exchange one stream of cashflow against another stream. (The "funds" were €319 million or about US$466 million - Jesse)

The case made front-page news in Germany, with one newspaper calling KfW "Germany's dumbest bank".

It also put pressure on Economy Minister Michael Glos, chairman of KfW's board of supervisory directors, and Finance Minister Peer Steinbrueck, who is deputy chairman. (Der Scheisse rolls downhill also in Germany - Jesse)

The ministries said the board backed management plans to examine KfW's risk management and business processes thoroughly.

"The supervisory board reiterates that Germany needs a strong development bank and thus supports the KfW board and all staff in the aim of steering KfW back into calmer waters as soon as possible so it can focus on core duties again," they said.

Sources have said the German lender's total exposure to Lehman was 536 million euros, including the Lehman transfer.

KfW had already taken a hit from liquidity lines given to business lender IKB the country's biggest casualty of the subprime crisis.

The Mother Bubble

The US Long Bond.

Or as the New York bondtraders used to say, "Big Daddy."

A picture or two are worth a thousand words.

It can go on indefinitely right?

Don't most man-made things continue on endlessly in this world even when they stop making sense?

Special thanks to Brian at ContraryInvestor.com

Primary bagholders. We'd like to think the Brits are acting as agents for others.

FDIC to Have Access to "Unlimited Amounts" from Treasury - Vote Set for 7:30 PM

The Weather Report says rough seas ahead, mates.

Wall Street Journal
OCTOBER 2, 2008
Revised Bill Lets FDIC Borrow Without Limits

The Senate financial market rescue bill would temporarily allow the Federal Deposit Insurance Corp. to borrow unlimited amounts of money from the Treasury Department in connection with the larger government deposit coverage that would extend until the end of next year.

This is important because it would increase the backstop that the FDIC has to make sure that insured depositors can be repaid if their bank fails.

U.S. President George W. Bush will speak with lawmakers to bolster backing for the Senate's $700 billion market-rescue bill. The vote most likely will come after 7:30 p.m. EDT, according to an aide in Senate Majority Leader Harry Reid's office. The vote is being held after sunset in observance of the Jewish holiday Rosh Hashanah.

The vote most likely will come after 7:30 p.m. EDT, according to an aide in Senate Majority Leader Harry Reid's office...Senate lawmakers decided to take off the cap completely, authorizing the FDIC to request from the Treasury "a loan or loans in an amount or amounts necessary… without regard to limitations."