Replies to post #115955 on ajtj99's Market Pulse

[stkboy1]

......this is I believe is also separate from the daily repo which is currently over 110 billion???

[RCKS]

aj
What do you make of the talk (it was a part of the Fed announcement)that they are in close contact with the ECB's? It seems to me they do need to act over there in some to strengthen the dollar, as we spiral downward it will take them along as well.

[rich ruscio]

I don't think the Fed is string pushing so much as they are attempting to keep the bank's balance sheets viable.

To quote another trite phrase, it isn't a liquidty problem, it's a solvency problem.

The value of the assets the banks have lent against is currently market priced at dimes on a dollar. If the assets have to be priced to market, the bank goes bust. Period.

There is the background presumption in there that the assets at issue are actually worth more than dimes on a dollar. The problem is, assets are worth what someone will pay for them, or their inherent cash flows. When markets seize up, prices drop. When margin calls happen, liquid assets like stocks get sold to cover. Whoopsie.

That's why I have the hope that something dramatic happens, with electric cars, or selling CA to the Chinese, or something. Else we risk zombie banks, and a very Japanese future.

And, I'm in cash / bonds / utilities.

[jdaasoc]

Most troubling thing these are all drastic forms of IOU's on existing tranches of debt.

No one is talking about writing new debt that could keep any concept of a US economic expansion going. All I see is contracting economy with inflationary overtones.

PS

GM Chyrsler for example spending all their time trying to find funding options for currently unfinanciable suppliers like Delphi, Plastech & American Axel. Auto plants going to shut down because not for lack of demand but suppliers don't have and capital to buy raw components

[anyer1]

Are the margin calls just beginning?

http://www.latimes.com/business/la-fi-credit7mar07,1,4517356.story?track=rss&ctrack=1&cset=true