Courtesy of Pam Martens
New York Fed Headquarters Building in Lower Manhattan
One or more U.S. or foreign banks that are primary dealers to the Federal Reserve Bank of New York is in need of longer-term loans that they are unable to get anywhere else – at least at an affordable rate of interest. That’s the only reasonable conclusion that can be drawn from the Fed’s announcement on Friday that it is extending its money pumping program to Wall Street until at least November 4 and will be offering an additional $310 billion cumulatively in term loans (most for 14-days at a time) as well as offering at least $75 billion daily in overnight loans.
The Fed’s money sluicing operation that began abruptly on September 17 is taking on the distinct appearance of its machinations during the early days of the 2008 crash – a time when it also refused to name the banks that were receiving the money until a multi-year court battle and congressional legislation forced its hand.
The open money spigot at the Fed comes at a time when global banks, including many that are among the Fed’s 24 primary dealer banks that are able to borrow from the New York Fed under its current repo (repurchase agreement) operations, have announced large job cuts. The most recent news came from the Financial Times over the weekend in a report that says HSBC is planning another 10,000 job cuts on top of the 4,700 it had previously announced.
Another European bank that is heavily interlinked via derivatives with Wall Street, Germany’s biggest lender, Deutsche Bank, has seen its stock set new historic lows all year. (See Lordy, Deutsche Bank Is Having a Helluva Bad Month.) In July, it confirmed plans to cut 18,000 jobs.
According to a chart published by Bloomberg News on September 24, job cuts planned by global banks at that point tallied up to 58,200. That was before the Financial Times reported this past weekend another 10,000 job cuts at HSBC. Securities units at both HSBC and Deutsche Bank are among the Fed’s primary dealers that are eligible to participate in its current repo loan program.
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