Anon alerted me to this in The Daily Telegraph:
Fearful banks parked a record €411bn (£344bn) with the European Central Bank (ECB) last night in a further sign that Europe's financial institutions are becoming increasingly wary of lending to each other.
The record amount was deposited just a week after the ECB lent 523 eurozone banks a total of €489bn in cheap loans in an attempt to keep credit flowing through the economy and prevent a full-scale credit crunch. Banks borrowed the money at the ECB's benchmark rate of 1pc, but receive an overnight rate of just 0.25pc, well below what they could earn in wholesale markets.
This means lenders are depositing any new cash back with the ECB at a loss in order to guarantee safety.
There's not much I can add to that, except to note that maybe this is how the ECB borrowed the money which they lent out a week or two ago, and the ECB is taking a 0.75% cut as insurance for guaranteeing inter-bank lending between banks with spare cash and banks with not enough cash, which seems perfectly fair to me.
The other possible explanation is that there are banks so stupid that they borrow money from the ECB with the sole purpose of depositing it back with the ECB.
Wednesday, 28 December 2011
What's the point of that then? (2)
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7 comments:
One of the mysteries of the 2008 debacle is the abscence of any parties suing each other over CDOs etc ...
Or even the rating agencies facing any flak in the courts?
Is there something going on they don't want the sheeple to know about?
I was a bit suspicious when the Fed lent all that money to European banks at such a good rate.
Was it a case of we'll take all that junk off your hands as supposed collatoral, meanwhile here's a few billion at a very; favourable rate; just don't upset the applecart by suing any American financial institutions.
BB, "Was it a case of we'll take all that junk off your hands as supposed collatoral, meanwhile here's a few billion at a very; favourable rate; just don't upset the applecart by suing any American financial institutions?"
That sounds like a very plausible explanation to me. Who knows what else goes on behind the scenes?
Don't forget the mysterious Greek CDO's that weren't CDOs (because the default was "agreed").
Basically there's NO market at the moment, it's all rigged central bank nonsense to keep affordability low (and a politically connected investor class rich) at the taxpayers longer term expense.
AC1
AC1, sure, the whole thing is rigged.
In my darker moments I wonder whether the driving force behind the Euro was in fact Goldman Sachs et al, in the same way as car mechanics get more business if car manufacturers produce cars which have great specifications when new, but then break down all the time. If the car manufacturers and the mechanics are the same people, then its pretty clear what will happen.
The money is there to repay bondholders and buy new sovereign debt issues surely?
The loans are for three years, not three days.
The simplest explanation for the original drive towards Monetary Union was that it was done on behalf of Moscow. Whether Moscow would have carried on pushing and funding after the USSR died, Lord knows. Mind you, just because an explanation is simplest doesn't mean that it must be right.
SL, the money is there to repay bondholders so that they can subscribe for new sovereign debt. Or perhaps it's there to refinance sovereign debt so that governments can lend money to the ECB to lend to banks to repay bondholders so that they can subscribe for new sovereign debt which the governments then use to [etc etc].
D, I thought it was the USA which was so in favour of the Euro, possibly on behalf of Goldman Sachs. The Russians mainly care about rigging oil and gas markets, I'm not aware they're into banking on a big scale.
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