SouthernDemocrat

At what level of borrowing do you think such a threshold would be reached?

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Charles Krauthammer describing Obama:

"He's got both a first-class intellect and a first-class temperament."

donsutherland1

I don't know. When foreign demand for Treasuries becomes insufficient, one would likely be approaching such limits. Ironically, prior to the 1987 stock market crash, the Japanese had become net sellers of Treasuries. That changed, when interest rates rose.

China has a lot of foreign reserves (more than $1.5 trillion). Chinese purchases of Treasuries will provide a good barometer.

donsutherland1

Earlier today, the Federal Reserve established swap facilities with Reserve Bank of Australia, the Sveriges Riksbank, the Danmarks Nationalbank, and the Norges Bank to help mitigate liquidity issues. The facilities will be in place through January 30, 2009.

The Federal Reserve announced:

Today, the Federal Reserve, the Reserve Bank of Australia, the Danmarks Nationalbank, the Norges Bank, and the Sveriges Riksbank are announcing the establishment of temporary reciprocal currency arrangements (swap lines) to address elevated pressures in U.S. dollar short-term funding markets. These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets. Central banks continue to work together during this period of market stress and are prepared to take further steps as the need arises...

In sum, these new facilities represent a $30 billion addition to the $247 billion previously authorized temporary reciprocal currency arrangements with other central banks: European Central Bank ($110 billion), Bank of Japan ($60 billion), Bank of England ($40 billion), Swiss National Bank ($27 billion), and Bank of Canada ($10 billion).

dirtpoorchris

And Lehman went under and its bad assets found there home as they should.
Will everyone just listen to this guy already.

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Leave it to US. To make the sun rise in the West. And fall on the East.

Gladiator

Will CDS Regs cause moreproblems than they solve?

"Credit-default swaps, which are traded between banks, hedge funds, insurers and other investors, are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt or to hedge against losses.

Market Disruption

They pay the buyer face value in exchange for the underlying securities or the cash equivalent should the borrower fail to adhere to its debt agreements. The market has grown 100-fold over the past seven years, with outstanding contracts referencing $62 trillion of debt.

New York regulators threaten ``to disrupt global derivatives markets'' through this action, said Robert Pickel, chief executive officer of the International Swaps and Derivatives Association. The New York-based industry group represents dealers and investors, and sets standards for trading.

``The state of New York should proceed very cautiously and in consultation with federal regulators before acting in a way that may ultimately cause more harm than good,'' Pickel said in a statement.

Until now, the state hasn't regulated the credit-default swap market even as bond insurance companies expanded into the business of guaranteeing securities through contracts rather than insurance policies.

MBIA, Ambac

Five of seven formerly AAA rated bond insurers, including Armonk, New York-based MBIA Inc. and Ambac Financial Group Inc. in New York, lost their top rankings after writing credit-default swap contracts on more than $100 billion of so-called collateralized debt obligations backed by subprime mortgages."

Bloomberg.com: U.S.


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How did Our Oil get under Their Sand?

Gladiator

Did China Regulator Ban Banks in China from further investments in the US?

"The China Banking Regulatory Commission (CBRC) on Thursday denied a media report in Hong Kong that it has told domestic banks to halt interbank lending to U.S. banks.

"The regulator has never, through any channel, issued a statement or told domestic commercial banks not to lend to U.S. financial institutions," the CBRC said in a statement.

The South China Morning Post reported on Thursday that the regulator ordered local banks to halt interbank lending to U.S. banks to avoid possible losses during the financial crisis. "

China banking regulator denies report on lending ban to U.S. banks - People's Daily Online


Is
China unhappy about US Buyout of Fannie Mae and Freddie Mack?

"The U.S. Treasury's takeover of Fannie Mae and Freddie Mac is good news in the short term for China, the biggest holder of the giant mortgage lenders' debt, but Beijing's huge U.S. exposure still poses a serious risk, a prominent government researcher said on Monday. China owned $376 billion of debt issued by U.S. government agencies, principally Fannie and Freddie, as of mid-2007.

The seizure of the two firms, prompted by worries over their shrinking capital, was the latest in a series of emergency steps taken by U.S. authorities to quell a year-long credit crisis that has helped push many economies toward recession.

"China has bought a lot of asset-backed securities, and there might be short-term improvement in price," said He Fan, an economist with the Chinese Academy of Social Sciences"

China frets at U.S. risk after Fannie/Freddie bailout: Financial News - Yahoo! Finance




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donsutherland1

Overnight, liquidity again began seizing up in international money markets. Bloomberg.com reported that the LIBOR rose to 3.88%, its highest figure since January 18, and the LIBOR-OIS spread widened to 219 basis points.

In response to the continuing liquidity challenges, the Federal Reserve announced additional steps "to support financial stability and to maintain a stable flow of credit to the economy..." Those steps were as follows:

1. The Term Auction Facility (TAF) would be increased from $25 billion to $75 billion.

2. Swap authorization limits with leading international central banks would be increased from $290 billion to $620 billion.

3. A new Forward TAF facility would be created to provide a total of $150 billion in funding.