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$100-billion handed over to banks for overnight loans! The top 15 largest banks now hold a combined total of $13.7 trillion in assets. Like they really needed i

$100-billion handed over to banks for overnight loans! The top 15 largest banks now hold a combined total of $13.7 trillion in assets. Like they really needed it. Congress did not okay this, nor did the Fed need any permission due to their autonomy. I believed they infused over $200-billion this year. That is equal to giving $1-million in startup capital to 20,000 startups.

qeternity 7y ago
20k * $1m does indeed equal $200b...but they are most definitely not the same thing.
- hiram112 7y ago
  20k * $1M is $20B, not $200B.
thoughtstheseus 7y ago
This is not an equity investment, those 20,000 startups would need to return the money the next day.
bransonf 7y ago
Assets don’t equal cash. Cash is liquidity. Without it, banks can’t make transactions. And due to post 2008-crisis rules, banks have to maintain a higher percentage liquidity. In the view of the fed, they would rather inject cash than return this requirement to pre-crisis levels. This isn’t the fed giving away money, it’s nothing at all like startup capital. Economics are complex. Don’t be outraged that the fed is trying to maintain a stable economy.
- hnaccy 7y ago
  Why can't the banks sell stuff to achieve the proper liquidity percentage?
  - bransonf 7y ago
    Well, you need buyers for one. And those buyers need cash. (And where do they get the cash... the repo market) Banks don't want cash. Cash sucks in terms of value. It's liquid, but it is constantly losing value due to inflation. Assets typically appreciate in value, so it is in the best interest of banks to maximize assets and minimize cash. You trade liquidity for value/earning potential. (Just thinking about opening a certificate of deposit at a bank compared to a money market or savings account. Lower liquidity == Higher interest rate) The repo markets exists so that banks don't have to hold tons of cash. If it didn't, banks would need TONS of cash on hand for all of their transactions, and it would significantly devalue them.
    - hnaccy 7y ago
      So there's not enough cash in circulation for banks to sell some of their assets marked down? In some sort of bad event won't the be unable to pay back the one day loan and so the fed is just helping them juke the required liquidity ratio?
      - bransonf 7y ago
        It's not a matter of cash in circulation. It's just against the incentive of banks to hold any more cash than necessary.
- undersuit 7y ago
  > Don’t be outraged that the fed is trying to maintain a stable economy. The explanation for the FEDs doing the lending is it will spike short term rates or something. Why can't we be mad that the Fed is willing to do this? Like what if I'm one of the institutions waiting on the sidelines to make some money off of short term lending and the Fed keeps tamping down on what could be a source of profit?
  - bransonf 7y ago
    > Like what if I'm one of the institutions waiting on the sidelines to make some money off of short term lending and the Fed keeps tamping down on what could be a source of profit? That's the problem. If you are one of these institutions, you're setting your interest rate much higher than is healthy for the repo market.
    - internet_user 7y ago
      ..but the omniscient Fed knows better than the market? Is that what you are saying?
      - bransonf 7y ago
        Well, they're part of the market. They have their judgments just like every other entity in the market. They use their best judgement to know that the repo market needs a cash injection. They're not infallible, but as regulators... their job is to regulate.
        SCAQTony 7y ago
        Nonetheless, $200-billion has been added to the money supply. (See FRED M2 Index link below from September 19 to the present) $200-billion could have been implemented for more worthy projects than the repo market. In my opinion, the FED needs more oversight from Congress and/or the Treasury. https://fred.stlouisfed.org/series/M2 https://fred.stlouisfed.org/series/M2
sdinsn 7y ago
> That is equal to giving $1-million in startup capital to 20,000 startups. No, it's not. The Fed is just providing short term liquidity.
toast0 7y ago
> I believed they infused over $200-billion this year. That is equal to giving $1-million in startup capital to 20,000 startups. Only if the startups are each going to pledge $1 M in treasury bonds, and return the money the next day (or in two weeks, the article also mentions the 14-day repo market).

qeternity 7y ago

20k * $1m does indeed equal $200b...but they are most definitely not the same thing.

hiram112 7y ago
20k * $1M is $20B, not $200B.

thoughtstheseus 7y ago

This is not an equity investment, those 20,000 startups would need to return the money the next day.

bransonf 7y ago

Assets don’t equal cash. Cash is liquidity. Without it, banks can’t make transactions. And due to post 2008-crisis rules, banks have to maintain a higher percentage liquidity. In the view of the fed, they would rather inject cash than return this requirement to pre-crisis levels. This isn’t the fed giving away money, it’s nothing at all like startup capital. Economics are complex. Don’t be outraged that the fed is trying to maintain a stable economy.

hnaccy 7y ago
Why can't the banks sell stuff to achieve the proper liquidity percentage?
- bransonf 7y ago
  Well, you need buyers for one. And those buyers need cash. (And where do they get the cash... the repo market) Banks don't want cash. Cash sucks in terms of value. It's liquid, but it is constantly losing value due to inflation. Assets typically appreciate in value, so it is in the best interest of banks to maximize assets and minimize cash. You trade liquidity for value/earning potential. (Just thinking about opening a certificate of deposit at a bank compared to a money market or savings account. Lower liquidity == Higher interest rate) The repo markets exists so that banks don't have to hold tons of cash. If it didn't, banks would need TONS of cash on hand for all of their transactions, and it would significantly devalue them.
  - hnaccy 7y ago
    So there's not enough cash in circulation for banks to sell some of their assets marked down? In some sort of bad event won't the be unable to pay back the one day loan and so the fed is just helping them juke the required liquidity ratio?
    - bransonf 7y ago
      It's not a matter of cash in circulation. It's just against the incentive of banks to hold any more cash than necessary.
undersuit 7y ago
> Don’t be outraged that the fed is trying to maintain a stable economy. The explanation for the FEDs doing the lending is it will spike short term rates or something. Why can't we be mad that the Fed is willing to do this? Like what if I'm one of the institutions waiting on the sidelines to make some money off of short term lending and the Fed keeps tamping down on what could be a source of profit?
- bransonf 7y ago
  > Like what if I'm one of the institutions waiting on the sidelines to make some money off of short term lending and the Fed keeps tamping down on what could be a source of profit? That's the problem. If you are one of these institutions, you're setting your interest rate much higher than is healthy for the repo market.
  - internet_user 7y ago
    ..but the omniscient Fed knows better than the market? Is that what you are saying?
    - bransonf 7y ago
      Well, they're part of the market. They have their judgments just like every other entity in the market. They use their best judgement to know that the repo market needs a cash injection. They're not infallible, but as regulators... their job is to regulate.
      - SCAQTony 7y ago
        Nonetheless, $200-billion has been added to the money supply. (See FRED M2 Index link below from September 19 to the present) $200-billion could have been implemented for more worthy projects than the repo market. In my opinion, the FED needs more oversight from Congress and/or the Treasury. https://fred.stlouisfed.org/series/M2 https://fred.stlouisfed.org/series/M2

sdinsn 7y ago

> That is equal to giving $1-million in startup capital to 20,000 startups. No, it's not. The Fed is just providing short term liquidity.

toast0 7y ago

> I believed they infused over $200-billion this year. That is equal to giving $1-million in startup capital to 20,000 startups. Only if the startups are each going to pledge $1 M in treasury bonds, and return the money the next day (or in two weeks, the article also mentions the 14-day repo market).