November 04, 2014

Fed needs to make up its mind fast, because now it is really creating confusion about the banks.

Sir, I refer to Gina Chon’s and Tom Braithwaite’s “US and European lenders raise fears over ‘living will’ cash reserve demands” November 4.

In it is reported that banks that face a liquidity crunch can currently tap the discount window as part of the Federal Reserve’s lender of last resort programs, but, that in the process of preparing their ‘living-wills’, they have been told not to assume continued access to it.

What? The Fed now allows banks a 5% leverage ratio, which implies a mind-boggling 20 to 1 authorized leverage of equity… and yet now they want to retire their lender of last resort support? It better makes up its mind fast… because now all we others are becoming really confused. If we are not able to count on big strong Fed to help out, then there is no way we small weaklings can allow banks to leverage that much.