Fed Teams With Central Banks on Credit

It is not clear to me that banks need more reserves as much as they need more capital. If I were Ben Bernanke I would be saying that the Fed will extend extra reserves only if the banks also increase their capital.

There has to be some price at which Buffett and Munger and company want to own a big chunk of Bank of America.

Link: Fed Teams With Central Banks on Credit: Financial News - Yahoo! Finance.

Comments

[howard]

as a long-time berkshire shareholder, i have every expectation that warren and charlie will deploy some of their capital at some point as this mess unfolds.

but my guess is that whether or not the target of that deployment is bank of america or someone else, we are not at that point yet....

[christofay]

that was one tequila party Greenspan threw and left to Bernanke to clean up.

the past several months there have been a few bouts of rumors of Buffett stepping in to save some sorry butt financial institution, BS for example, and the rumors prove not to work out.

if Buffett is so wonderful, why not speculate of him stepping in along with Munger for the top job, Bernanke's?

[christofay]

from Floyd Norris, "I’d love to see which assets [Fed window accepting mystery meat as collateral] are pledged, and how much the Fed lends against them. But the Fed won’t disclose those facts. Nor will it let us know which banks borrow using the new facility."

The Fed will loan 85% against any "AAA" rated collateral without any market based pricing. As we know now often the mystery stuff passes in the market at much less than 85%.

The socialization of losses but not the socialization of profit is taking giant steps forward

[christofay]

"There has to be some price at which Buffett and Munger and company want to own a big chunk of Bank of America."

Ah, yeah, sure, as value investors they would be looking at it if it trades at less than book value. But they are conservative investors too so that would have to be less than book value with clarity of the BoA black box, no hidden surprises

[christofay]

Greenspan has a piece up on that reality distortion field the Fox Wall Street Journal op-ed site today, he entitled it "How I Didn't Do It" to be said in a Republican whine.

[G]

If mortgage banking & banks lie about the true value and content of level I, II & III mortgage loans… then what about business loans? How solid are they? What’s next??

What about foreign & US banks and other institutions whom blindly purchased these little bundles of mortgage joy? I bet their lawyers jump on this intention fraud with demand for full face value of mortgage debit ASAP from the originators of those little bundles of joy. Costing billions… maybe trillions of dollars to mortgage banking and the banks.

How do you correctly determine book value if you can’t place a proper value on assets.

Buffet isn’t a fool.

[G]

If mortgage banking & banks lie about the true value and content of level I, II & III mortgage loans… then what about business loans? How solid are they? What’s next??

What about foreign & US banks and other institutions whom blindly purchased these little bundles of mortgage joy? I bet their lawyers jump on this intention fraud with demand for full face value of mortgage debit ASAP from the originators of those little bundles of joy. Costing billions… maybe trillions of dollars to mortgage banking and the banks.

How do you correctly determine book value if you can’t place a proper value on assets.

Buffet isn’t a fool.

[Clayton]

Didn't wall street banking exec types take home beaucoup bonus last year, some thing to the tune of 25 billion?
http://www.iht.com/articles/2006/12/25/business/bonus.php
I'm sure they can come up with some capital to save their employers and their jobs. You cant tell me they spent it all on ferrari's and hookers and blow, although i guess with the weakening dollar 25 billion doesn't get you what it used to.
So are we going to dismantle whats left of depression era regulations. Who needs glass steagall when the fed can now just make arrangements to have the swiss central bank secretly auction off dollar loans? Hell why can't I just open a savings account at the fed. Eliminate the middle man. And there loan interest rates are better than any credit union much less bank. Oh well, im curious as to how much liquidity can be hoarded so i wanna how this plays out. And honestly who isn't curious to see what kind of feedback bush's landmark bankruptcy reform law generates once bankruptcies begin to swell here in the coming months. (My wager is colorful and constructive, unless your assets are in a well lawyered trust, then i expect just chuckles ;)

i do appreciate the fact that i first stumbled upon the term CDO here on Brads blog about 4 years ago. And Brad has not shown one iota of "i told you so" or "should have listened"(all though i for one did and bought some far out puts on some sub prime and alt-a lenders). Just concern for the situation and how best to rectify to keep the economy going for the regular joe. You sir, are a gentleman, a scholar, and a saint.

[Bruce Ferguson]

Buffet has been warning about selling our assets. Is anyone listening?

[Bruce Ferguson]

Buffet has been warning about selling our assets. Is anyone listening?

[Maynard Handley]

"There has to be some price at which Buffett and Munger and company want to own a big chunk of Bank of America."

This is, of course, true (in a sense --- of course BoA COULD have so many liabilities it has highly negative net worth, and thus undesirable at any price). But it raises an interesting issue. Economists, the same people who say "there is no such thing as unemployment, only people unwilling to do given jobs at the prevailing wage", always seem to talk about liquidity decoupled from price. This strikes me as very strange --- whether your asset is art, land, or a corporation, chances are someone is willing to buy at a low enough price. So what's going on here? Why isn't liquidity treated as a function? Which of course makes it more interesting because now you can start asking questions about the function's shape and derivative, whether it differs across people and across time, whether it differs for different asset classes, etc.

The whole thing strikes me as very strange.

[dax]

nice post! keep up! im looking forward to read more from you!