User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Friday September 19, 2008 - 16:37:59 GMT
Foreign Exchange Analytics - www.fxa.com

Share This Story:
| | Email

FX Blog - Fed, Treasury, Congress and Cavalry Ride to Rescue of Banks. What Next?

 Well yesterday was the worst day of the banking crisis by a long shot going back 13 months.  Actually it was worse than the 1987 stock market crash.  Well actually it was worse than the 1929 stock market crash.  There was (use past tense cautiously) a banking panic…an institutional run…which if not stopped would have led to a run on deposits at commercial banks too (WAMU has seen a run by depositors if not reported) by firms and households – FDIC insured or not.  The run on the US custodial banks Thursday as money market funds looked sure to uniformly break the buck dumping assets into a market already in lock down was frightening.  And no counterparties were taking trades from non-depository financial firms, including the remaining two US security houses Thursday, even on securities and cash/FX with one-day settlement as best I can tell.  And this was on top of record liquidity infusion by the central banks of the world.  It was Armageddon in the banking system globally on Thursday.

 

Well that was before Bruce Willis arrived on the meteor heading straight at planet earth with his team of MacGyvers and Scooby Dos to take care of business.

 

US Treasury, Fed and Congressional leaders finally got it…either commit the US government’s balance sheet to the problem in a completely sufficient way (i.e. whatever it takes) or it is lights out for the banks and the economy and likely capitalism. 

 

I am not ready to say the panic is over and the patient cured.  But it is looking far closer to a sufficient response to the panic (stop calling it a crisis) than anything to date. 

 

Perhaps the least effective and potentially most reversible measure announced today was the banning of short selling of financial stocks by the SEC (and mirrored in UK, Australia, Switzerland and Ireland and I would suspect other countries in due course).  But it has had the desired effect with financials roaring back to life and leading broad gains in key indexes.  Without a real cure soon, even with a ban on short selling will see stocks go to zero if the market determines the business is worth zero.

 

But the more significant news emerged well after the close Thursday and rumored well ahead of the close allowing for an explosive move up in stocks Thursday in late session trading and a global return of elements of risk taking behavior – yes the RTC solution for warehousing bad bank assets was being cooked up and appeared to have broad backing among political parties, elected officials and regulators.  While the details remain unclear, the choices are very clear…there are not many…do it on a grand and convincing scale or don’t so it at all.  CNBC reported that taxpayers will be on the hook up front for up to $500bln…I think that number should be doubled for starters.  Maybe $500bln gets to heart of bad MBS, but does not include bad everything else, and more of bad is in the cards ahead as the real economy does not hold up and any cleansed bad bank will have severe limitations on risk and lending. 

 

And today more news (apart from the banning of short selling) – US Treasury committed, with President’s approval, to use $50bln from the Exchange Stabilization Fund (mainly euros and yen and some dollar balances – euro and yen would be swapped with ECB and BOJ for their dollars rather than the Treasury using the Fed to sell euro and yen for dollars in the open market) to keep the money market funds from breaking the buck (NAV falling under $1.00 which would prompt asset sales, namely ABCP, prompting a black hole of falling prices and wealth for the millions of households and tens of thousands of firms that hold large (near) cash balances in these funds…that was behind the run on custodial banks Thursday as they are main manager of institutional money market accounts.

 

Then the Fed this AM said it would supply the banking system with funds (temporarily) to buy ABCP, providing a first line of defense for the money market world…so that US Treasury does not have to top up a money market account with ESF money. 

 

It is hard to keep up with all of the tricks Bruce Willis and his band are announcing – may even be more as I write this and take my eyes off the screens. 

 

Now for the however.   

 

There is a chance that Washington bungles it badly and allows politics of the moment – remember every member of the House and a third of the Senate face elections in November and Congress breaks for the November election at the end of next week – delay or derail a blank check answer for the banking panic.  My own personal view is more Nordic – just take over the weak institutions and then slowly sell them back to the private sector.  Republicans are in general opposed to government bailouts of the private sector and have the wherewithal to block legislation (needed for this level of response) authorizing a blank check for the banking system overhaul ahead that could run $1-2trln I think before it is resolved (and this number could, maybe even would, come down longer-term as even some of the most toxic of securities find buyers and or recover some value ad can be sold).   And Democrats eyeing the prize of the November general election could try and use the financial panic to promote its ticket in an election that at the Congressional level in particular is expected to go solidly blue (and at the executive level pre-Palin) – interim elections in places like Louisiana and Texas where safe Republican seats in Congress have gone to the Democrats in the last year surprising many.  In other words why put humpty dumpty back together again which might stabilize or even improve the erosion of support for the GOP.  There will be lots of hard bargaining between the two sides of the aisle in the next two weeks and unless partisan rancor and the election are clearly taken out of the picture, the arrival of the US Cavalry will quickly go the way of General Custer at the Little Bighorn (sorry for swinging between images of Bruce Willis in Armageddon and George Custer’s day of reckoning with the mighty Sioux nation).  

 

However, however.

 

The days of a hackneyed-finger-in-the-dike-bank-by-bank approach to “The Great Financial Panic of 2008” – my attempt to guess at what it will be called in 10 years – are over.  Washington, if not Senator McCain, is getting it.

 

Where from here?

 

Well banks – yes not just investment banks – will never be the same.  They will have large direct or indirect government stakes until they can be sold and they will operate in a tightly regulated world without leverage and without a no-risk-management policy.  For those that recall, Treasury Secretary Paulson gave his first speech on what he hoped to accomplish after being confirmed the new Secretary of the Treasury at Columbia University – he said the US must address making Wall Street competitive with the capital markets of London, Europe and soon to be Asia or New York in particular would no longer be a financial powerhouse…oh and the problem?...too much regulation – the Sarbanes Oxley hangover.

 

So we have a permanently handicapped US banking system (likely global banking system and for no one’s fault but their own) on the one hand and as the IMF astutely noted today a declining or stagnant economic backdrop in the developed economies.      The negative feedback loop is upon us and it is now how deep and how long a recession lies ahead…where we are now is just the beginning. 

 

The blank check Washington extends to the US banking system (maybe autos and airlines shortly too…and your averaged leveraged home owner) will bust the bond if not the buck.  There is a reflation world ahead and if you have to wait for S&P or Moody’s to tell you that the 30-year bond (which hit a 45-year low in yield this week) is not AAA, then I know where you can buy some option-Arm-backed securities cheaply. 

 

David Gilmore

 

Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."



Elevate Your Trading With The Amazing Trader!

The Amazing Trader includes:
  • Actionable trading levels delivered to YOUR charts in real-time.
  • Live trading strategy sessions.
  • Market Updates with Trading Tools.

Register To Test Your Amazing Trader


Trading Ideas for 23 October 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Tue 24 Oct
All Day flash PMIs
Wed 25 Oct
01:30 AU- CPI
08:00 DE- IFO Survey
08:30 GB- GDP
14:00 CA- BOC Decision
14:30 US- EIA Crude
Thu 26 Oct
11:45 EZ- ECB Decision
12:30 US- Weekly Jobless
14:00 US- Pending Homes Sales
Fri 27 Oct
12:30 US- GDP
14:00 US- final Univ of Michigan

Forex Trading Outlook


Potential Trading Opportunities


  • POTENTIAL PRICE RISK: Medium Tue-- All Day Global flash PMIs. First good look at October economic performances.



  • POTENTIAL PRICE RISK: HIGH Wed-- 01:30 GMT AU- CPI. Top Inflation indicator.

  • POTENTIAL PRICE RISK: HIGH Wed-- 08:00 GMT DE- IFO Survey. Top German indicator.


  • POTENTIAL PRICE RISK: HIGH Wed-- 14:00 GMT CA- BOC Decision. No Policy Change Expected.


  • POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top Weekly WTI Statistic.



John M. Bland, MBA
co-founding Partner, Global-View.com

EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




TRADER ADVOCACY ARTICLES

Trader's Advocate Articles..

pic

Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

 
Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map


Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog

Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.

 

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105