A brief lull in market moving news is only now allowing us to catch a breath long enough to point out that the Fed caused the last 200 point drop in the market, yesterday.
The last drop came immediately after the Fed asked Goldman Sachs and J.P. Morgan Chase "to help make $70-$75 billion in loans available to AIG." WTF?
Is the Bernanke Fed totally tone deaf?
Earlier in the day,yesterday, the Fed Funds rate shot up to 6%, as banks were hoarding cash and just didn't want to lend to one another. The Fed had to inject $70 billion to force the Funds rate down to its 2% target. So we have a scenario where banks aren't even lending to one another, there are whispers that even Morgan Stanley and Goldman may not be able to withstand the panic,and the Fed goes out and asks Goldman and MorganChase to find $70 to $75 billion for AIG. I repeat the Fed had to inject funds because banks weren't loaning to one another and, in this crisis environment, the Fed asks Goldman and MorganChase to scratch up $70 to $75 billion for a firm on the brink of failure. C-L-U-E-L-E-S-S.
That's when the market tacked on the last 200 point drop in yesterday's 500 point decline.
-Robert Wenzel
Good observation; I didn't connect those two things ("request" and the further drop).
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