Friday, April 11, 2008

End game

Macroman often has interesting things to say, even though he is an insane chartist. Here is his position on the end game for all the ridiculous financial tricks the Fed keeps rolling out on a fortnightly basis:
Macro Man isn't sure what is wrong with the TSLF, but he's pretty sure that something is wrong with it; the participation rates have, in aggregate, been much lower for the TSLF than the TAF. Moreover, this week's TAF was heavily oversubscribed and awarded at a level ABOVE prevailing LIBOR rates. What that means is that banks were so desperate for liquidity that they were bidding for secured borrowing, with a haircut, from the Fed at a higher rate than they could ostensibly borrow sans haircut and collateral from each other.

Macro Man stands by his view that the endgame here is the US and other governments writing a bit fat check to buy all the unwanted crap off of banks' balance sheets and holding it til maturity.
Bingo. The US government will give banks tax payer money in exchange for duff mortgages. I also think it is likely they will take tax payer money and give it to homeowners, because, lord knows, they haven't been given enough money over the past 5 years, or the past 50.


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