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|User Info||Special weekend edition - Bank Reserves?; entered at 2008-02-04 17:11:44|
Registered: 2007-07-24 San Diego
I guess my problem is maybe this statement: But what it does indicate is that the banks are continuing to lend into a locked "hard money" environment - that is, they are failing to attract capital against which to lend, and are instead borrowing from The Fed to keep the debt initiation cycle going. |
My question is why is this an issue? If the reserves are there from TAF funds because those are the "cheapest" funds available (banks do have a vested interest in deploying as much capital as they can), it doesn't pressage a crisis. The other money was either loaned out or used for operations. Covering mortgage losses perhaps? Maybe even hiring strippers for the CEO and board. If the TAF money goes away, or gets expensive, then the banks need to get that money from some other source, probably a more expensive source.
Seems to me that all thats happened so far is the FED gave a bunch of banks a below market rate loan to get them to go out and loan to others. The question then would be, have they in fact done that, or are they just hoarding? That would be deflationary.