While UK Gov and BoE speculate to accumulate their bank bailout options, to greelight £45bn or not, conditional on convertible terms or not, the Fed has announced a plan to buy massive amounts of short-term debts in a dramatic de-clogging effort. At US market opening the expectation is high of a rebound, and the market is ticking up.
To help ease credit stresses, the Fed announced last night it will provide as much as $900 billion in cash loans to banks. Most of the loans are for 28-days and 84-days. Some are shorter,13 and 17 day loans. The Fed said it will also buy UP TO $500bn CP (commercial paper) that many banks issue and rely on to finance their day-to-day overhead costs such as paying the electricity bill, purchasing office supplies, and even for making payrolls. Will this be seen as great news or evidence of banks having cash-flow embarassments even to the extent of not meeting all regular running costs?
Market sentiment is not helped by the less than televisual appeal of the likes of Bernanke (who trusts men in beards?) or Richard Fuld's less than saintly explanation for his reputed $600m in take-home from Lehmans since 2000 (never mind the $3.5bn in bonus fund and wages owed when Lehmans registered for Chapter 11, or the missing $4bn transferred only hours beforehand, ot the many $billions of missing from other firms' rehypothecated collateral? - see crunch imagery blog)