tag:blogger.com,1999:blog-8261438457608174618.post8581620311503527107..comments2023-05-12T16:41:08.754+08:00Comments on Forecast Error: Central Banks InterveneCCLuhttp://www.blogger.com/profile/08569770663341206042noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-8261438457608174618.post-6191352194059306052011-12-02T18:30:25.057+08:002011-12-02T18:30:25.057+08:00I'm not aware of the ML thing. It might be som...I'm not aware of the ML thing. It might be something temporary. Investment banks do not take individual deposits therefore they are not eligible for FDIC insurance.<br /><br />Commercial banks have a huge chunk of FDIC-insured deposits in the balance sheet, those will not go as easily as the money in the brokerage account. That is not the most appealing part because they also have to keep some reserves in the Fed without any interest. The most important thing for commercial banks is the discount window from the Fed, which is the reason why GS and MS turned into bank holding companies in 2008.<br /><br />We know eventually Spain, Italy and other countries can pay up, but that can also be in the distant future if they endure a prolonged recession, which is more and more likely by the day. The bad government debt still clogs the balance sheets of European banks, and they might even bring down some banks very soon. Whether they are as bad as subprime mortgages is yet unknown, but they are bad for sure.<br /><br />After reading Paulson's detailed description of what really happened in the Capitol Hill about TARP, I start to think there is no chance for Europe at all. In fact, I couldn't think of any democratic country in the world other than the U.S. can pass a bill in that magnitude. I'm not saying it only in the dollar term. The ideology behind two parties are too different to pass this bill, but it gets done anyway. I don't think it can happen in Europe when people are even more divided. The only chance they can pass a bill like that is through fear, but by then it might be too late to do anything.CCLuhttps://www.blogger.com/profile/08569770663341206042noreply@blogger.comtag:blogger.com,1999:blog-8261438457608174618.post-40942285462469662462011-12-01T22:25:33.910+08:002011-12-01T22:25:33.910+08:00I read from Shelagh Heffernan's textbook, and ...I read from Shelagh Heffernan's textbook, and it said Merrill Lynch in 2000, obtained permission from the Federal Reserve to offer FDIC insured deposit, and I think some other investment banks are also members of FDIC, such as Morgan Stanley. And SIPC (Securities Investor Protection Corporation) has a $0.5MM insurance for each account if its brokerage firm is a member of SPIC. Lastly, money market funds can buy into FDIC-insured CDs so there is some protection to it. <br /><br />But I understand these measures cannot provide immediate liquidity, it's more like a safety net so people will not do a bank run on investment banks or money market funds. Sadly at the time short-term borrowing came quite easily and financial institutions just abused it and obtained a massive leverage, when everyone woke up and realized how easy it was, they became extremely risk-adverse and stop lending capital. <br /><br />I think the European sovereignty debt problem is not that troublesome when compare to subprime. After all, these countries (besides Greece) can still repay, but it's much more difficult for these crappy real estates to regain value. Yet we still survived the financial crisis. And the European banks are not as leveraged as many institutions in 08.<br /><br />Now it's a matter for ECB to go tough on PIIGS and really tighten them fiscally. How likely do you think Germany and ECB will seize troubled countries state-run enterprises, gold reserve and push through austerity measures from a political point of view? Also, I don't understand what's the point of ECB keep stressing it's stance of not guaranteeing sovereignty debts? If ECB is going to provide unlimited short-term lending to the banks, it kind of indirectly guaranteeing these debts anyway. So sick of ECB.楊大寶https://www.blogger.com/profile/04692847628587763718noreply@blogger.com