Investment banks are borrowing from Fed

[AlphaOmega7]

Investment banks are borrowing from Fed

Wednesday March 19, 12:12 pm ET

NEW YORK (Reuters) - Investment banks Goldman Sachs Group Inc (NYSE:GS - News), Lehman Brothers Holdings Inc (NYSE:LEH - News) and Morgan Stanley (NYSE:MS - News) are testing a new program that allows investment banks to borrow directly from the Federal Reserve, according to people at the banks.

In a bid to stabilize jittery markets, the Fed said on Sunday that it would allow investment banks to borrow from its discount window using a wide range of investment-grade securities as collateral.

Markets were unstable after a run on the bank at Bear Stearns Cos Inc (NYSE:BSC - News) forced the investment bank to sell itself to JPMorgan Chase & Co (NYSE:JPM - News) at a fire-sale price.

The Fed has also cut the rate at which dealers borrow at the discount window to 2.5 percent from 3.5 percent, in two separate actions this week.

Goldman Sachs plans to test the program sometime this week, a spokesman said. Morgan Stanley Chief Financial Officer Colm Kelleher said his bank has already tested the program, and a spokeswoman for Lehman said the investment bank has also done so.

more...http://biz.yahoo.com/rb/080319/usbanks_fed.html?.v=2

[Rondaben]

Same thing is happening at commercial and other investment banks as well. They are either pulling operating capital from the fed discount window or are tapping lines of credit (look at CIT).

Most of us know what it means if you rely on credit for day to day expenses. How long could you sustain daily use of your credit card to pay for things?

[goinghome]

[QUOTE=yourcurrentoptions; Soon they will be giving loans to companies like McDonalds to keep the hamburgers flowing. Seriously!



:aha:lol2:pound:lol2:heh

You're too funny! Wish I could go get one of those "McLoans."

[RobertB]

to borrow from its discount window using a wide range of investment-grade securities as collateral.
What this seems to translate to is, the collateral can be any old junk grade bonds, subprime pieces of paper or anything else that can be "roughly" construed as a paper asset. Never mind whether it has any real value, there is a war going on.

[farmgirl]

Well, seeing the Fed is feeling generous I think I'll drive up to this window and ask for a few mill, just to keep me afloat for the next few weeks. :aha I bet I'd make better use of it than these banksters.

[Rondaben]

Well, seeing the Fed is feeling generous I think I'll drive up to this window and ask for a few mill, just to keep me afloat for the next few weeks. I bet I'd make better use of it than these banksters.

But you are such a .....commoner. You aren't allowed in our playground.