Banks now have a NEGATIVE reserve ratio

[acptulsa]

I'm just glad they are a privately owned entity or the United States would be broke.

Number one, who does the U.S. owe, and shouldn't the nation honor its debts?

Number two, ever hear of a little consumer protection agency called the FDIC?

 

[jonahtrainer]

I've been saying this for a couple months now. There are one or more major banks already insolvent. This data seems to confirm that. No, those banks that are insolvent should not be allowed to continue operations. But what did you expect? This whole system is like a shell game.

You have hit closest to the target but 'those banks that are insolvent' is inaccurate.

After deeper research this is the first time ever in the history of the Federal Reserve that the non-borrowed reserves number has ever gone negative. The Fed has always been in control over the individual banks and held moral suasion over them which prevented them from borrowing to meet their required reserve ratio.

Bernake has said the loans will go on as long as necessary and he has been increasing the size of them.

What makes you think the banks would ever want to repay these loans? As you point out, they are sure a cheaper source of capital than anywhere else. The banks have now shifted the cost of their reserves onto the Fed who is then printing the reserves out of thin air. Because the Federal Reserve system functions like one big bank (whose required reserve ratio is now being printed out of thin air every week) and because the Fed has lost all control, they no longer have any moral suasion power, therefore hyperinflation is the only option to a bank run. We've now officially entered the Weimar Germany phase.

 

[Dr.3D]

Number one, who does the U.S. owe, and shouldn't the nation honor its debts?

Number two, ever hear of a little consumer protection agency called the FDIC?

A nation need not honor its debts if it is bankrupt.
The FDIC is a fraud and will be bankrupt along with the rest.

 

[spudea]

just means the fed will cover all the bank's reserves. If they didn't, and we had massive bank closures, it would be 10 times worse than the great depression.

 

[derdy]

isn't there a minimum ratio to be kept? how could they go to negative?!?

I'm thinking that some of their "reserves" included off-balance sheet assets such as CDOs, MBSs, and commercial paper.

That whole market was way over-leveraged and these banks are now forced to liquidate since no one is buying and they're getting pennies on the dollar and losing billions.

That's how I imagine they have negative "reserves."

 

[derdy]

just means the fed will cover all the bank's reserves. If they didn't, and we had massive bank closures, it would be 10 times worse than the great depression.

The Fed won't be able to keep up with the tsunami of losses that's about to come crashing to shore.

Bank closuers are likely to happen and this could be as bad as the great depression. Perhaps there won't be soup-lines, but the losses will be astronomical

 

[spudea]

The Fed won't be able to keep up with the tsunami of losses that's about to come crashing to shore.

Bank closuers are likely to happen and this could be as bad as the great depression. Perhaps there won't be soup-lines, but the losses will be astronomical

Banks are closing. A fed employee told me 5 banks close a week. When a bank goes under, they send in a team and transfer all the records to another bank, and back up the funds from the fed.

There are several fail safes in place since the great depression. It just means the destruction of our currency...

 

[cputter]

In case anyone is still reading this thread:

Quick question...

The fed just updated their data at
http://www.federalreserve.gov/releases/h3/Current/

It seems to me they should publish every week's data every Thursday afternoon. Though the updated data they have on their site is the same as last weeks. Even though it says Feb. 7th the actual data for the last week is missing...

Maybe they've gone so far into the negative that they're too afraid to release the data?

 

[dougkeenan]

Bump. What happened?

 

[Mesogen]

he he. When I break for lunch I walk to the delis and other food places nearby. Almost everyday I walk by the IMF and World Bank headquarters. They are right across the street from each other and two blocks from the White House (and the FDIC). When I see people walking out of the building I wonder if they are the ones getting screwed or if they are the ones doing the screwing.

 

[ChooseLiberty]

The Fed and Treasury can prop up banks with fiat dollars indefinitely.

They can make accounting entries indefinitely.

This will be done under the - Too Big To Fail doctrine for all the money center banks. The little banks that fail aren't critical - business as usual.

The only casualty will be the $ and the bank stocks/dividends.

This might be a good time to buy bonds on money center banks. Some Port Authority bonds were issued recently with yields of 20%. Is the Port Authority going bankrupt? Did it go bankrupt after 9/11? Of course inflation may kick in soon that could negate a lot of the yield.

 

[propanes]

You have hit closest to the target but 'those banks that are insolvent' is inaccurate.

After deeper research this is the first time ever in the history of the Federal Reserve that the non-borrowed reserves number has ever gone negative. .....

It may have happened last in 1959.

I heard a good explanation of this on the Financial Sense Newshour.

In the 3rd hour, part 1 of the February 16 show there's a caller question and answer at the 1:20 mark.

http://www.financialsense.com/fsn/main.html