7.4 BILIONA (ang Trillion) od FED cz1

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Niesamowite.

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www.bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk&refer=home
Fed Pledges Top $7.4 Trillion to Ease Frozen Credit

Nov. 24 (Bloomberg)

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In the three years before the crisis, such average weekly borrowing by banks was
$48 million, according to the central bank. Last week it was $91.5 billion.

Lehman Failure

The failure of a second securities firm, Lehman Brothers Holdings Inc., in
September, led to the creation of the Commercial Paper Funding Facility and the
Money Market Investor Funding Facility, or MMIFF. The two programs, which have
pledged $2.3 trillion, are designed to restore calm in the money markets, which
deal in certificates of deposit, commercial paper and Treasury bills.

“Money markets seized up after Lehman failed,” said Neal Soss, chief economist
at Credit Suisse Group in New York and a former aide to Fed chief Paul Volcker.
“Lehman failing made a lot of subsequent actions necessary.”

The FDIC, chaired by Sheila Bair, is contributing 20 percent of total rescue
commitments. The FDIC’s $1.4 trillion in guarantees will amount to a bank
subsidy of as much as $54 billion over three years, or $18 billion a year,
because borrowers will pay a lower interest rate than they would on the open
market, according to Raghu Sundurum and Viral Acharya of New York University and
the London Business School.

Bank Subsidy

Congress and the Treasury have ponied up $892 billion in TARP and other funding,
or 12 percent.

The Federal Housing Administration, overseen by Department of Housing and Urban
Development Secretary Steven Preston, was given the authority to guarantee $300
billion of mortgages, or about 4 percent of the total commitment, with its Hope
for Homeowners program, designed to keep distressed borrowers from foreclosure.

Most of the federal guarantees reduce interest rates on loans to banks and
securities firms, which would create a subsidy of at least $6.6 billion annually
for the financial industry, according to data compiled by Bloomberg comparing
rates charged by the Fed against market interest currently paid by banks.

Not included in the calculation of pledged funds is an FDIC proposal to prevent
foreclosures by guaranteeing modifications on $444 billion in mortgages at an
expected cost of $24.4 billion to be paid from the TARP, according to FDIC
spokesman David Barr. The Treasury Department hasn’t approved the program.

Automakers

Bernanke and Paulson, former chief executive officer of Goldman Sachs, have also
promised as much as $200 billion to shore up nationalized mortgage finance
companies Fannie Mae and Freddie Mac. The FDIC arranged for $139 billion in loan
guarantees for General Electric Co.’s finance unit.

The tally doesn’t include money to General Motors Corp., Ford Motor Co. and
Chrysler LLC. Obama has said he favors financial assistance to keep them from
collapse.

Paulson told the House Financial Services Committee Nov. 18 that the $250
billion already allocated to banks through the TARP is an investment, not an
expenditure.

“I think it would be extraordinarily unusual if the government did not get that
money back and more,” Paulson said.

‘We Haircut It’

In his Nov. 18 testimony, Bernanke told the House Financial Services Committee
that the central bank wouldn’t lose money.

“We take collateral, we haircut it, it is a short-term loan, it is very safe, we
have never lost a penny in these various lending programs,” he said.

A haircut refers to the practice of lending less money than the collateral’s
current market value.

Requiring the Fed to disclose loan recipients might set off panic, said David
Tobin, principal of New York-based loan-sale consultants and investment bank
Mission Capital Advisors LLC.

“If you mark to market today, the banking system is bankrupt,” Tobin said. “So
what do you do? You try to keep it going as best you can.”

“Mark to market” means adjusting the value of an asset, such as a
mortgage-backed security, to reflect current prices.

Some of the bailout assistance could come from tax breaks in the future. The
Treasury Department changed the tax code on Sept. 30 to allow banks to expand
the deductions on the losses banks they were buying, according to Robert
Willens, a former Lehman Brothers tax and accounting analyst who teaches at
Columbia University Business School in New York.

‘Wells Fargo Notice’

Wells Fargo & Co., which is buying Charlotte, North Carolina-based Wachovia
Corp., will be able to deduct $22 billion, Willens said. Adding in other banks,
the code change will cost $29 billion, he said.

“The rule is now popularly known among tax lawyers as the ‘Wells Fargo Notice,’”
Willens said.

The regulation was changed to make it easier for healthy banks to buy troubled
ones, said Treasury Department spokesman Andrew DeSouza.

House Financial Services Committee Chairman Barney Frank said he was angry that
banks used the money for acquisitions.

“The only purpose for this money is to lend,” said Frank, a Massachusetts
Democrat. “It’s not for dividends, it’s not for purchases of new banks, it’s not
for bonuses. There better be a showing of increased lending roughly in the
amount of the capital infusions” or Congress may not approve the second half of
the TARP money.

Factors Adding to Reserves Plus Off-Balance TSLF

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Factors Adding to Reserves Plus
Off-Balance TSLF from 8/8/07 to 11/19/08

www.cumber.com/home/Factors.pdf