What a day, you should’ve stayed home shootin’ the breeze all day

~nonpoint – what a day~

Seriously, what a day it’s been and it’s not even noon!

As per my regular duties, I call up one of our investment traders to buy about $26.5MM in overnight discos. No biggie, right? Wrong. (PS on half of what I ordered, got 7 bips. the other half, 10 bips. wtf)

As we are all quite aware of the state of economy, do we really realize what’s going on?

Clearly, George W doesn’t. With what he said this morning, the banks being in a capital crunch, he has no clue what’s going on. Someone clearly wrote that speech for him, with no questions asked. Camp David, is that mortgaged out?

The banks are not in a capital crunch. They have plenty of money. The fed is throwing money at banks. Giving interest on reserve requirements, which is more of an incentive to lend. Buying commercial paper = more free money, since it’s unsecured. Guarantee on all deposits (temporarily). Lower fed funds rate = cheaper for banks to borrow. There are more and more opportunities for arbitrage! The fed is asking for it! There is not an issue of capital. There is an issue of confidence. It’s evidence in the rates that I got this morning – banks and investors want short cash. So short overnights barely exist anymore. People don’t want to hold on to bonds for more than a week. Needless to say, investors aren’t exactly helping with the confidence issue.

Uncharted territory, my friends.

~ by roguelynn on October 10, 2008.