Wednesday, December 12, 2007

Discount Rate Offers to Banks

Seems like the Feds, together with Bank of Canada, Bank of England, European Central Bank and the Swiss National Bank will be launching some temporary term auction facility that banks can use to secure loans at the Feds discount window rate of 4.75%.

Finally after 4 months, I hear something that is being done right, which is to address the liquidity problem. This should solve the short term liquidity problems the banks are facing. The sub-prime mess should start to stabalise from now on. However, I still don't like the cutting of the benchmark rate. They should have just cut the discount rate to 4.5%, and announce this term loan auction together, without cutting the rates. This would definitely be what I expect from a "inflation" hawk.

Oh well... Markets should start to normalise just in time for Christmas. However, the sub-prime mess is still not over. The degrade of the risk management of banks is appalling. Looks like I can't even trust banks. Maybe I should just trust my pillow or something.

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