Now this has to be scary

Now this has to be scary

I would like to think that this is some sort of sick April Fools joke, but, alas they are serious! What happened to free markets?? This is the same blue print as Parajumpers Damen Billig the now failed Bush Administration Preemptive Strike Foreign Policy. The notion that the „financial SWAT team“ goons will muscle Parajumpers Sale Billig their way into the private Moncler Jacken dealings of an institution that THEY think poses a risk to THEIR fraudulent fiat money Ponzi scheme is frightening. Presumably fund managers will be secretly flown to detention centers where „water boarding“ will be allowed to extract critical information like where they are hiding their gold!

In the past two weeks, the Federal Reserve, long the guardian of the nation’s banks, has redefined its role to also become protector and overseer of Wall Street.

With its March 14 decision to make a special loan to Bear Stearns and a decision two days later to become an emergency lender to all of the major investment firms, the central bank abandoned 75 years of precedent under which it offered direct backing only to traditional banks.

Inside the Fed and out, there is a realization that those moves amounted to crossing the Rubicon, setting the stage for deeper involvement in the little regulated markets for capital that have come to dominate the financial world.

Leaders of the central bank had no master plan when they took those actions, no long term strategy for taking on a more assertive role regulating Wall Street. They were focused on the immediate crisis in world financial markets. But they now recognize that a broader role may be the result of the unprecedented intervention and are being forced to consider whether it makes sense to expand the scope of their formal powers over the investment industry.

„This will redefine the Fed’s role,“ said Charles Geisst, a Manhattan College finance professor who wrote a history of Wall Street. „We have to realize that central banking now takes into its orbit everything in the financial system in one way or another. Even if that program is allowed to expire this fall, the Fed’s actions will have lasting impact, economists and Wall Street veterans said.

As they made a series of decisions over St. Patrick’s Day weekend, Fed leaders knew that they were setting a precedent that would indelibly affect perceptions of how the central bank would act in a crisis. Now that the central bank has intervened in the workings of Wall Street banks, all sorts of players in the financial markets will assume Parajumpers Giuly that it could do so again.

Major investment banks might be willing to take on more risk, assuming that the Fed will be there to bail them out if the bets go wrong. But Fed leaders, during those crucial meetings two weeks ago, concluded that because Billig Parajumpers Outlet the rescue caused huge losses for Bear Stearns shareholders, other banks would not want to risk that outcome.

More worrisome, in the view of top Fed officials: The parties that do business with investment banks might be less careful about monitoring whether the bank will be able to honor obscure financial contracts if they assume the Fed will back up those contracts. That would eliminate a key form of self regulation for investment banks.

Fed leaders concluded that it was worth taking that chance if their action prevented an all out, run for the doors financial panic.

Those decisions were made in a series of conference calls, some Canada Goose Sale in the middle of the night, against hard deadlines of financial markets‘ opening bells. Fed insiders are just beginning to collect their thoughts on what might make sense for the longer term.

Whether there is a formal, legal change in the Fed’s power over Wall Street or not, the recent measures, which were taken under a 1930s law that can only be exploited in „unusual and exigent circumstances,“ represent a massive departure from past practice.

The central bank was created in 1913 to prevent the banking crises that were commonplace in the 19th century. The idea was that the Fed would be a backstop, offering a limitless source of cash if people got the bright idea to pull all their money at once out of an otherwise sound bank.

In exchange for putting up with regulation from the Fed and requirements over how much capital they can hold, banks have access to the „discount window,“ at which they can borrow emergency cash in exchange for sound collateral. A bank might take deposits from individuals and make loans to people buying a house. Hedge funds do something similar: borrow money in the asset backed commercial paper market and use it to buy mortgage backed securities. But the bank has lots of regulation and access to the discount window; the hedge fund does not.

In recent decades, more of the borrowing and lending that was the sole province of banks has come to be done in more lightly regulated markets.

A decade ago, the nation’s commercial banks had $4 trillion in credit market assets, and a whole range of other entities mutual funds, investment banks, pensions, and insurance companies had about twice that much. Now, those other entities have about three times as many assets, based on Fed data. On March 4, Fed Vice Chairman Donald L. Kohn told the Senate Banking Committee that he „would be very cautious“ about lending Fed money to institutions other than banks or, as he put it, „opening that window more generally.“ The Fed Canada Goose Herren did exactly that 12 days later.

The Fed has intervened in the doings of Wall Street in the past, BilligMoncler Weste but in limited ways. Most notably, in 1998, the New York Fed brought in heads of the major investment banks to cajole them into a coordinated purchase of the assets of the hedge fund Long Term Capital Management, to prevent a disorderly sell off that could have sent ripples through the financial world.

Treasury Secretary Henry M. said that if investment banks are given permanent access to the Fed’s emergency funds, they should have the same kind of supervision that the Fed requires for conventional banks. „This latest episode has highlighted that the world has changed, as has the role of other non bank financial institutions, and the interconnectedness among all financial institutions,“ he said in a speech Wednesday.

If Congress and the administration do broaden the formal powers of the Fed, it would be the latest in a long history of financial policy made out of a crisis. The Great Depression fueled an array of stock exchange regulation. The 1987 stock market crash led to curbs on stock trades. The 2002 corporate scandals led to the Sarbanes Oxley Act.

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