Hey!

Whoa Fox News has Obama 46% to McCain 39 %

http://www.wfsb.com/presidenti…..etail.html

Nonetheless, pretty much every finance company in the world is going to be tightening credit to consumers and businesses, no matter what the central banks prime rates are.

Purely anecdotal, but I haven’t seen nearly the “usual” number of unsolicited applications for credit cards appearing in my mailbox lately.

So I, Mr Taxpayer, have coughed up several trillion bucks (so far) to the private sector robber barons who will in turn deny me the ability to continue conducting business and paying in a solid tax revenue?

Dugg

makes it hard for institutions like GE to determine what rates they should be lending at.

Then they have no business lending money! This isnt for amateurs.

OT: Nate Silver (fivethirtyeight.com) projects Obama winning with:
– 94.1% likelihood
– 350.5-to-187.5 electoral votes
– 52.0%-to-46.6% popular vote advantage
– 56.2-to-41.8 senate-seat advantage for the Dems.

And therein lies the problem. Nearly every US company has been drawn down by the temptation to make money on the side business of how they invest their own [and borrowed and leveraged] funds in unknowably risky securities.

We don’t manufacture very much, and the companies that are theoretically manufacturing firms make so much of their profits from the financial side that they’ve forgotten how to run their own businesses properly. This is all falling.

Same here….. those you have been pre-qualified offers have dropped off and what I am getting are checks from my paid off accounts saying I can transfer balances…..

I also had my home equity account cut from $60,000 to 18,000…… thankfully I only own a few thousands (which will be paid off soon)…… been remodeling my house room by room…… its 20 years old and showing it….

My oldest son just closed on a FHA 30yr fixed……

Does that still count the Connecticut for Lieberman Independent in the D column?

when deregulation broke down the walls where banks were selling insurance – accidental death and disability……. where War munition companies are mortgage lenders….. this whole corporate mess is truly a mess….

Yes, mack! Unfortunately!

I’ve borrowed on the LIBOR index exactly once in my life, and that was to buy a 1 1/4 acre piece of property in Costa Rica for $32 K. Paid it off quickly as I could. I always have liked the 11th district cost of funds. Wonder what has happened there?

Goody! But that’s still not the 60 seat dems in the senate that we need, huh?

On one of my prior pieces some commenter tried to claim GE wasn’t a finance company. When you make half your money from finance, you’re a finance company. The problem is that companies with real products, like GM, spent a long time thinking they were finance companies rather than car companies, or whatever, so they managed the wrong things.

(Though I think that will only reduce LIBOR somewhat as a large part of the LIBOR spread is not counterparty risk but the fact that banks have to lend at below inflation.)

Ian, as you know, banks operate on the spread between two interest rates. I don’t see where inflation enters into that spread, since it is the same on both sides. What am I missing?

Does that still count the Connecticut for Lieberman Independent in the D column?

IMHO: 56.2 + 41.8 = 98 = 100 -2 = 100 – (Bernie Sanders + Joe Lieberman)

Usually LIBOR is not a lot higher than the Fed Funds rate (or the central bank rate of your choice). The fact that it is right now means there must be a reason for it. The current reason most people go with is counterparty risk – ie. lend to a bank, and they might default.

The other option is that banks are lending quite a bit above Fed Funds rates because inflation is far far above Fed funds rate.

The answer may be a bit of both, but the argument against counterparty risk is that when banks have gone under, in every case that I am aware of, the Fed has made sure that other banks got their money back, so there doesn’t actually seem to be counterparty risk to short term loans to other banks. OTOH, of course, Paulson and Bernanke have been a bit erratic about things, and people may not trust them, unless the policy explicit rather than implicit.

Our major banks are on the hook for derivatives worth $200 Trillions.

The financial system is broke. Busted. Beyond repair.

Government bail outs merely loot the economy to feed international central bankers and prolong the agony.

We need a bankruptcy reorganization to null and void derivatives, close the FED, and regain control of our money supply.

We must rid ourselves of foreign central bankers.

IIUC, the LIBOR is a function of the flow of credit through the labyrinth of inter-bank loaning. But that credit comes from depositors and central banks and flows through to state and local governments and to corporations. Now that flow has been short circuited. Banks can all borrow from central banks for less than from each other, and some central banks are by-passing interbank loaning altogether and loaning directly to state and local governments, which leaves interbank loaning a slowly churning pool, whose flow is meaningless.

teddy’s upstairs

I know a guy with friends in community banking who says that the small banks quit overnight lending to big banks out of fear that they didn’t know which ones were weak. They preferred to park at the Fed overnight.

Citgroup was saying back on April 18,2008 that the Libor mechanism was broken (surprised?) in Euroweek.

See here

And the intervention by Central Banks has not fixed the Libor mechanism for short term credit.

I hope the short term credit will ‘be fixed in the next month or two’ because of the harm that will occur if such doesn’t occur but it is hope tinged with deep concern that the actions necessary will not be taken in time because of the entrenched power interests in the financial markets; Paulson and Bush will fight tooth and nail to keep the existing structures in place.

Bottomline is that the Libor mechanism is broken and capital infusion won’t help as long as the Central Banks keep providing liquidity to the banks at a lower cost than the private markets.

OT, I put up a diary discussing ways to influence the outcomes of the capital injection process. Congress did not specify a lot, but it required the Treasury to publish its policies, and it gives Congressional committees strong oversight. If we work together, the outcome is more likely to be favorable to taxpayers.

My understanding is that LIBOR is based on more fluctuating rates, and the 11th district cost of funds was more stable. Don’t claim to know much, but it has served me well.

Nate has stated in his posts before that he considers them Dems in his accounting since they caucus with the Dems…!

From one of the diaries I’ve posted:
Why Libor Is the Key
http://seekingalpha.com/articl…..is-the-key
And a history of LIBOR
http://www.bloomberg.com/apps/…..refer=home

O.T. with apologies. It’s been a long day, & this is my only time to report…

I’m talking northeast quadrant of OH. Signs few as of yet, but equal tw’ the 2 vying for the top dawg spot, even on through what I thought was pure red country west of us, as we travelled on family bidness today. Casual glances from students in city of Oberlin who obviously thot I looked like a, well – to be honest – silly old lady wearing an Obama t-shirt. Hahaha. Walked past the youthful wry grins and visited the Demo. headqrtrs briefly. Busy busy busy, tutoring and then sending out yet another of probably a bunch of canvassers – all just as young-looking, but wayyy more serious and committed as those others lounging in the early fall sunshine on the town square. Those canvassers WILL do their part; I have no doubt.

The young fella in charge asked how he could help me, and nearly fell over backward when I said I was from another part of the state and just was looking for signs promoting some state supreme ct. candidates. Sticking closely to his assignment, bless him, he wondered if I’d like to join in their phone bank. Had to remind him I lived over an hr. away from his territory. He remained mystified as we thanked him and went on our way, but I think we parted feeling reassured that there were probably people all over the state who felt the same commitment.

No OH SupreemCt Justice signs available there just then, but I’ll bet they’ll take them seriously when they do arrive. A glance or 2 assured me those in charge were carefully following the same tight set of rules as in the hdqrtrs I’d visited earlier, many miles to the east of the city.

Meeting others in the area, older non-students not associated directly with the college, plus elderly folk with various infirmities we all can expect to experience as we age, showed an overwhelmingly positive reaction to my Obama t-shirt, some hugs, many smiles and thumbs up. People may age and grow frail, but they still care, more than people realize. And they vote. ;->

Overall impression: people are committed and determined, inspired. The campaign is tight, smart, amazingly well managed.

This day gave me hope, BIG TIME.

Arrived home, an hour plus southeast of notoriously liberal Oberlin, to find our array of political signs standing tall and proud in our yard.

Briefly noted that John King, on CNN, is still trying to figure out the mystery of Ohio. John? short answer: I’m not alone. We ALL are fed up with what the repugs have done to this country.

Also heard tonite that sarah’s peeved at mcsame for dampening her future career plans. Gee whillickers, sarah. I’d tell ya how sorry i be, but… What was the question??

Usually LIBOR is not a lot higher than the Fed Funds rate (or the central bank rate of your choice). The fact that it is right now means there must be a reason for it. The current reason most people go with is counterparty risk – ie. lend to a bank, and they might default.

The other option is that banks are lending quite a bit above Fed Funds rates because inflation is far far above Fed funds rate.

Per this diary, http://oxdown.firedoglake.com/diary/655

“Are Central Banks Making Libor WORSE?”

Click on the chart to expand it and see who the banks are that report to the British banking Assc. that sets LIBOR.
“This also means the market’s new favorite idea of having G7 countries guarantee all inter-bank loans will do nothing. If enacted, banks would still be missing an incentive to use the inter-bank loan market because they can get all the funding (loans) they need from their neighborhood central bank and at a much lower rate.”

AND, PLEASE, read the comments associated with the above link for more understanding/education.

It appears to me that funds may be largely flowing around and past interbank loaning, thereby making their numbers divergent and perhaps meaningless.

Then that leaves two others unaccounted for. ;-)

A couple of days ago, Nate said that he consider the Dem’s chances of a 60 seat majority to be “one in four.”

Those are very good stuff. My thanks.

Thanks Wigwam; didn’t think anyone was reading my diaries.

At least the British have competent financial leadership, at least in hw they are responding to the crisis (don’t get me started on the myth of Thatcherism!) The British are said to be nationalizing the RB of Scotland and HBOS tomorrow morning, and looking for solid protection for the public, including forcing the banks to start lending again. From the Times Online:

“The Chancellor will also offer government guarantees on interbank lending, a key part of the financial system that has virtually dried up.The scale of the nationalisations dwarfs the rescues of Northern Rock and Bradford & Bingley and represents a potentially huge risk for the taxpayer. In return, the Government will insist on putting its own representatives on the banks’ boards and require them to reopen lending to small businesses and restrain bonus payments.”

http://business.timesonline.co…..932250.ece

Ishmael, link didn’t work. Let’s see if this works

What I’m wondering about is this “including forcing the banks to start lending again. From the Times Online

How will such be ‘forced’ given that the Bank of England has been injecting liquidity(cash) to these banks and ,aside from overnight lending occasionally, they have not been lending to each other for the short term credit markets?

I saw this
and found this most interesting because of the reluctance of Paulson/Bush to do the same thing; “That would mean it could take board seats and control dividend payments at both companies, the newspaper said.” And the article I think you referenced said “In return, the Government will insist on putting its own representatives on the banks’ boards and require them to reopen lending to small businesses and restrain bonus payments.”

And -again- we don’t hear the same from U.S. ‘authorities’.

The article also says this -”if investors do not answer the call to buy shares”- which we haven’t heard from the U.S. authorities, only crap about buying ‘common stocks’.

Dood. Thanks. You are posting some very good stuff that is really helping me get my mind aroudnt his stuff. (I’ve still a long way to go.)

And the article I think you referenced said “In return, the Government will insist on putting its own representatives on the banks’ boards and require them to reopen lending to small businesses and restrain bonus payments.”

And -again- we don’t hear the same from U.S. ‘authorities’.

IIUC, the U.S. ‘authorities’ will get non-voting stock so as to avoid any possible appearance of “progressivism.”

GE Capital outperforms it’s peers in terms of default rates and will continue to do so in the future. Bet on it.
The underwriting discipline is second to none.

It’s issues right now are due to the commercial paper market. No finance company is immune from a credit cycle.

GE Capital will not need a bail out. It’s balance sheet is strong and currently undergoing defensive changes to weather the worst of the storm yet to come.