Troubled bank? Fed charges bank 7% on overnight loan

July 12, 2009 by · Leave a Comment
Filed under: Industry News 

Wall Street Journal Blogs posted a piece about a single bank being charged a inordinate amount of interest on a overnight bank loan when the If you are being charged 7% on a overnight loan from another bank then you know that you are in trouble.  According to the article, the last time this happened was when Lehman Brothers failed.  A 7% rate on a overnight loan says there is a “real” chance that you will not be replay that loan the next day.  The NY Federal Reserve knows which undisclosed bank it was.   It will be interesting to watch how this plays out and if it is actually a large banking institution or if it is a smaller regional or local bank?

News (Wall St. Journal Blogs):

There’s been some chatter in the market this week about whether a bank may be in trouble. The source of the concern is an anomaly in the federal-funds rate, that’s the rate banks charge each other to borrow money overnight.

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Overnight Commercial Paper Rates Rise as Bank Bailouts Spread

October 6, 2008 by · Leave a Comment
Filed under: Global News 

Everyone has this “whatever it takes attitude” and this is going to be the mess they leave us with. No one is talking about what happens when the economy contracts and we are left with all this excess liquidity? My bet is on massive inflation that has never been seen in this country. We are witnessing global debasement of currency that are trying to keep up with us which is futile because people feel more comfortable with our currency over other foreign currencies at this point.

At a point we should see a change in that attitude and then I would say instead of having a single reserve currency, we will see a basket along with some measure being put into place that ties the currency to gold in some way to serve as an indicator to show if there is a major expansion in any countries monetary base. .02

News Piece:

Corporate short-term borrowing rates soared as bank bailouts spread through Europe and the Federal Reserve said it would double its auctions of cash to banks to thaw short-term lending.

Yields on overnight U.S. commercial paper jumped 0.94 percentage point to 3.68 percent, according to data compiled by Bloomberg that stretch back to January 1996. That’s the most since the eight-month high of 3.95 percent set Sept. 30 after the U.S. House of Representatives rejected a plan to rescue banks; the bailout eventually was signed into law last week.

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