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New York Fed Again Upsizes Liquidity Plans for Turn of the Year

wsj.com

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Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#41

Post by fasteo »

funemployed wrote: post #13

If I lend my friend $10 every day for lunch and he pays me back the next day and this happens 5 days in a row in what context would it make sense to say I have lent him $50 dollars? The linked discussion about cumulative liquidity seems completely full of FUD and designed to obfuscate rather than illuminate its readers. Less of this and more links to Matt Levine please.

Complete ignorance about this, but I guess this is how accounting works. You need to track how the money flows, so you write -$10 fives times and +$10 five times. You end up in the same position, but now you can track where the money went and how it came back to your wallet.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#43

Post by joering2 »

PeterStuer wrote: post #35

In case like me you wondered "Why would anyone need money overnight? (or just for a second, actually)" EDIT: As the commenter below points out, it is actually over very short periods to even out a 2 week average period, but the mechanic is indeed as explained AFAIK the "overnight loans" are a vehicle to dodge the reserve requirements for banks. In theory the bank is not allowed to fall below a certain reserve thresho…

Thank you. This is actually first comment that explains whats going on. Now since my understanding is that this is something relatively new (in terms of volume pumped in) can someone explains WHY this is happening? Why banks need to dip below the line so often these days. And is this behaviour can come eventually with some negatvie consequences to banks or individuals holding loans, stocks etc?

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#44

Post by yeahigotgoats »

funemployed wrote: post #13

If I lend my friend $10 every day for lunch and he pays me back the next day and this happens 5 days in a row in what context would it make sense to say I have lent him $50 dollars? The linked discussion about cumulative liquidity seems completely full of FUD and designed to obfuscate rather than illuminate its readers. Less of this and more links to Matt Levine please.

you should be asking why your friend needs a loan every day and one friend is not the proper analogy, all your friends would be asking you for a lunch loan. which should make you think that something is wrong. instead you spend time blindly defending the system that is causing all the actual problems. while the people that actually benefit from that system just laugh at you

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#45

Post by 24gttghh »

PeterStuer wrote: post #35

In case like me you wondered "Why would anyone need money overnight? (or just for a second, actually)" EDIT: As the commenter below points out, it is actually over very short periods to even out a 2 week average period, but the mechanic is indeed as explained AFAIK the "overnight loans" are a vehicle to dodge the reserve requirements for banks. In theory the bank is not allowed to fall below a certain reserve thresho…

If this is indeed the case, my outrage at the headline would seem warranted.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#46

Post by ww520 »

jstewartmobile wrote: post #40
AnimalMuppet wrote: post #16

> 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. We're talking about an overnight loan of $120 billion (that is, a loan that is paid back the next morning, lent again the next night, paid back in the morning, etc. This article is trea…

If it is propaganda, who does it serve? And BTW, where's my $120B overnight loan?

When you have $120B asset, the FED will gladly lend you the money. These are collateralized loans.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#47

Post by beamatronic »

funemployed wrote: post #13

If I lend my friend $10 every day for lunch and he pays me back the next day and this happens 5 days in a row in what context would it make sense to say I have lent him $50 dollars? The linked discussion about cumulative liquidity seems completely full of FUD and designed to obfuscate rather than illuminate its readers. Less of this and more links to Matt Levine please.

In your example it matters where did you get the $10 from? Your kids college account? It still really only matters when your friend fails to pay you back the next day. The first time it happens, do you still loan him the second day? Now you’re in for $20 out of your kids college fund. How about that third day? It gets real, real fast.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#48

Post by dzab »

PeterStuer wrote: post #35

In case like me you wondered "Why would anyone need money overnight? (or just for a second, actually)" EDIT: As the commenter below points out, it is actually over very short periods to even out a 2 week average period, but the mechanic is indeed as explained AFAIK the "overnight loans" are a vehicle to dodge the reserve requirements for banks. In theory the bank is not allowed to fall below a certain reserve thresho…

Yes, this. Well put

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#49

Post by AnimalMuppet »

jstewartmobile wrote: post #40
AnimalMuppet wrote: post #16

> 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. We're talking about an overnight loan of $120 billion (that is, a loan that is paid back the next morning, lent again the next night, paid back in the morning, etc. This article is trea…

If it is propaganda, who does it serve? And BTW, where's my $120B overnight loan?

It serves those who wish to paint the Fed as totally irresponsibly flooding money into financial assets. Why? Because they think it serves whatever axe they have to grind. Anti-Wall-Street? Anti-Fed? I suspect the former, given the publication, but I'm not sure.

Where's your $120B overnight loan? Well, I'm pretty sure these loans aren't free. Where's your $7 million to pay the interest?

[Edit: And even if you have $7 million, do you really want to use it to borrow $120B overnight? You probably don't, unless you really have good reason why you need $120B overnight.]

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#50

Post by IshKebab »

joering2 wrote: post #43
PeterStuer wrote: post #35

In case like me you wondered "Why would anyone need money overnight? (or just for a second, actually)" EDIT: As the commenter below points out, it is actually over very short periods to even out a 2 week average period, but the mechanic is indeed as explained AFAIK the "overnight loans" are a vehicle to dodge the reserve requirements for banks. In theory the bank is not allowed to fall below a certain reserve thresho…

Thank you. This is actually first comment that explains whats going on. Now since my understanding is that this is something relatively new (in terms of volume pumped in) can someone explains WHY this is happening? Why banks need to dip below the line so often these days. And is this behaviour can come eventually with some negatvie consequences to banks or individuals holding loans, stocks etc?

Well, if you can trade all of your customers' money you make more profit! Yes your risk of collapse is higher, but that's somebody else's problem.
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