Many see this as spiralling out of control. There is apparently a limit of $800bn in cash assets given out at any one time. If this rate continues, we could see the Fed giving out over a trillion dollars by the end of summer. Read that again. Now read it slower and let that sink in. That's a "t", yes.Yahoo! Finance wrote:Fed Offers $100 Billion More to Banks
Friday March 28, 4:42 pm ET
By Martin Crutsinger, AP Economics Writer
Fed Offers $100 Billion More to Commercial Banks to Fight Credit Crisis
WASHINGTON (AP) -- The Federal Reserve announced Friday it will auction an additional $100 billion in April to cash-strapped banks as it continues to combat the effects of a credit crisis.
The central bank said it would make $50 billion available at each of two auctions, on April 7 and April 21.
Through the end of March, the Fed has provided $260 billion in short-term loans to commercial banks through the innovative auction process. It also has employed Depression-era provisions to provide money to investment banks.
All the moves have been designed to cope with a serious financial crisis that has roiled U.S. and global markets and caused the near-collapse of Bear Stearns Cos., the nation's fifth largest investment bank.
The Fed has been holding auctions every two weeks since December to provide short-term loans to commercial banks. It started with auctions of $20 billion, then pushed the level to $30 billion, and in early March raised the auction amount to $50 billion as the credit shortage grew more severe.
In announcing the move to $50 billion last month, the Fed said it would continue the auctions for at least the next six months, unless credit conditions show they are no longer needed.
The auctions are just one of a series of unorthodox steps the Fed has taken to battle the current crisis. The biggest of those moves was an announcement that it was allowing investment banks to borrow directly from the Fed. Previously, only commercial banks, which face tighter regulations, had that privilege.
The Fed also said it would make available $30 billion in financing to support the sale of troubled Bear Stearns to JP Morgan Chase & Co., hoping to prevent a bankruptcy that could have rocked Wall Street.
Private economists said the auctions were having a positive impact but that troubles still exist in many sectors of the credit markets because of multibillion-dollar losses many financial institutions have suffered as the result of soaring defaults on mortgage loans.
"The Fed has worked some positive magic," said Mark Zandi, chief economist at Moody's Economy.com. "At least the panic has subsided as the risk of another major failure has receded given that financial institutions now have access to a lot of cash through the various lending facilities the Fed has established."
The Fed's auctions have drawn criticism from some that the central bank, and ultimately U.S. taxpayers, could be financing a bailout for big Wall Street firms that had engaged in risky lending practices.
Fed Chairman Ben Bernanke will face questions about the Fed's recent moves when he testifies on Wednesday before the congressional Joint Economic Committee.
There's a reason Germany is fearing a total economic collapse now. This hole cannot be plugged. Consumer confidence in the US is at lows not seen in three/four decades and major institutions like Bear Stearns are game for failing. Who is next?
The Game They Play
Testing The Limits?The Telegraph wrote: When the going gets tough, banks yelp for nanny
By Jeff Randall
Last Updated: 12:24am GMT 27/03/2008
Bank customer: "What's the difference between a recession and a depression?"
Bank manager: "In a recession, you lose your job. In a depression, I lose mine."
Remarkable, isn't it, just how quickly champions of laissez-faire solutions can become advocates for state intervention. All it takes is for their gravy-train to break down.
When freedom to play with barely any restrictions was making them rich beyond imagination, big-shot financiers applauded "light-touch" regulation. The looser the rules, the louder they cheered.
Now, however, as credit is crunched, losses mount and prospects for lucrative employment come under threat, many titans of unfettered enterprise are suddenly crying out for nanny.
Not for them the tough love of supply and demand. No, sir. These are desperate times, requiring generous measures of tender, loving care.
The essential plumbing of commerce, it is alleged, has become dysfunctional. Or, as Josef Ackerman, chief executive of Deutsche Bank, said: "I no longer believe in the market's self-healing power."
Why ever not? Nowhere on the tin does it say that markets will correct themselves without someone being hurt. Indeed, for markets to function properly, pain, somewhere along the chain, is inevitable.
Markets work because they create winners and losers, not jobs-for-life security. Financial Darwinism doesn't just underpin the survival of the fittest, it ensures the extinction of pea-brained dinosaurs.
Corporations with too much fat and insufficient speed end up in evolution's Room 101. This is often forgotten when the trees are full of fruit.
In his book, The Final Crash, Hugo Bouleau (the nom de plume of a City investment manager) predicts: "Reckless lending will come back to haunt many a greedy banker and catch up with those directors that set excessive sales targets, forcing bank employees to fund unsuitable projects, chase ever riskier clients and sell inappropriate investment products."
This process is already under way in London and New York. Had it occurred anywhere else, one could be sure that Wall Street and the City would be nodding their approval.
After all, job losses = cost reductions; company insolvencies = sector consolidation; falling prices = buying opportunities. Great value is often found on a rubbish tip.
"But hang on a minute," the bankers yelp, "it's happening in banking. Banking. That means us." Yes boys, I'm afraid it does.
A smack by the invisible hand of market forces no longer seems such a good idea, does it? Far more appealing is the soft touch of Other People's Money. Cue: chorus of calls for taxpayers' funds to rescue distressed lenders.
We are told by the banks that they are too important to be allowed to fail, that their operations are so inextricably linked with the real economy we would be plunged into a 1930s-type calamity if a big one went under.
Forget moral hazard, we are urged, it's in everyone's interest to bail them out.
Those who got us into this mess are demanding that we get them out of it. They put a gun to our heads, insisting that, without immediate action, everyone will feel their pain (funny, I don't recall feeling the joy of their jackpot bonuses). Catharsis for a few will lead to nemesis for many.
Central banks seem to agree, so the Federal Reserve fixes a deal at Bear Stearns. This is no Northern Rock, a haven for small savers, but one of Wall Street's most egregious examples of knock-em-down-drag-em-out investment banking.
At a time when so many Americans are losing their homes, it's hard to think of a company less deserving of state support.
Paul Krugman, professor of economics at Princeton University, forecasts: "As Bear goes, so will the rest of the financial system. And if history is any guide, the coming taxpayer-financed bail-out will end up costing a lot of money."
The banks have landed us in this bad place because, over many years, they learnt how to wriggle out of regulation. Special investment vehicles were created to park risk. Derivatives were invented that became the financial equivalent of Frankenstein's monster - they took on a life of their own. In short, there emerged a parallel system of Wild West behaviour.
The banks' cocktail of greed and irresponsibility will, I'm sure, produce a wave of fresh regulation to clamp down on recent excesses.
Many of the new strictures will be counter-productive - they always are - in the same way that Sarbanes-Oxley legislation, after Enron and WorldCom, drove public share offerings out of New York and into London.
Never mind. For hyper-ventilating politicians - those who can think of nothing better than sticking their fingers into the free-enterprise pie - the sub-prime mortgage mess has turned into a two-inch tap-in. It's an unmissable chance to justify far-reaching extensions of their activities.
Christopher Fildes, who graced these pages for many years, once warned that while bankers and investors are counting their losses, the next worst thing is "the spectacle of finance ministers... and their supporting cast of bag carriers and sherpas hurrying to meet each other and to think of something that they or their spokesmen can subsequently announce. They are tempted at such times to take initiatives".
One dreads to think.
FT.com wrote:Jump in rice price fuels fears of unrest
By Javier Blas in London and Daniel Ten Kate in Bangkok
Published: March 27 2008 18:30 | Last updated: March 28 2008 09:06
ice prices jumped 30 per cent to an all-time high on Thursday, raising fears of fresh outbreaks of social unrest across Asia where the grain is a staple food for more than 2.5bn people.
The increase came after Egypt, a leading exporter, imposed a formal ban on selling rice abroad to keep local prices down, and the Philippines announced plans for a major purchase of the grain in the international market to boost supplies. Global rice stocks are at their lowest since 1976.
On Friday the Indian government imposed further restrictions on the exports of rice to combat rising local inflation, with traders warning that the new regime would de facto stop all India’s non-basmati rice sales.
The measures include raising the minimum price for selling abroad non-basmati rice by 53 per cent to $1,000 a tonne. Exports of premium basmati rice are likely to continue, although volumes could also suffer as the government also increased the minimum export price and scrapped export tax incentives.
While prices of wheat, corn and other agricultural commodities have surged since late 2006, the increase in rice prices only started in January.
The Egyptian export ban formalises a previously poorly enforced curb and follows similar restrictions imposed by Vietnam and India, the world’s second- and third-largest exporters. Cambodia, a small seller, also on Thursday announced an export ban.
These foreign sales restrictions have removed about a third of the rice traded in the international market.
“I have no idea how importing countries will get rice,” said Chookiat Ophaswongse, president of the Thai Rice Exporters Association. He forecast that prices would rise further.
The Philippines, the world’s largest buyer of the grain, said on Thursday it wanted to purchase 500,000 tonnes after it failed to buy a similar amount earlier this month. It is struggling to import 1.8m-2.1m tonnes to cover a production shortfall and on Thursday confirmed it would tap emergency stocks maintained by Vietnam and Thailand.
Rice is also a staple in Africa, particularly for small countries such as Cameroon, Burkina Faso and Senegal that have already suffered social unrest because of high food prices.
Thai rice, a global benchmark, was quoted on Thursday at $760 a tonne, up about 30 per cent from the previous daily quote of about $580 a tonne, according to Reuters data. Some traders, however, said the daily jump was not as steep, adding that Thai rice had already traded at about $700 a tonne this week.
Rice prices have doubled since January, when the grain traded at about $380 a tonne, boosted by strong Asian, Middle Eastern and African demand.
Additional reporting by Roel Landingin in Manila
Copyright The Financial Times Limited 2008
