Okay it is true a limited number of banks are on the official watch list. However, it is also true that steps have been taken because of concern over the whole banking system.
Perhaps Xort could explain why non-borrowed reserves of Fed depositary institutions fell from roughly an average of 43 billion in 2007 up to July, and since then have steadily fallen to -1.5 in January and now -101 as at April 9 2008. Talking whole billions only.
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The source is
http://www.federalreserve.gov/releases/h3/Current/. Now the notional reserves remain much the same except that instead of actually having 43 billion they now have -101 billion. So they had to borrow 144 B. This came from 100 B term loan auctions, and the rest from other credit facilities.
Now quite possibly I don’t understand this. A billion sounds a lot to me. Let’s say last year I had 43 thousand nett and I now owe nett 101 thousand. What the hell, make it millions – it is only paper. What do you think your chances are of hitting me up for a loan? Sorry mate, it has been a bad year and every month it gets worse. I don’t actually have anything to lend you unless I borrow it. Oh what about that million you lent me last year? You want it back? Well umm. No problem mate, safe as houses. We have a capital issue coming up - how about buying some shares?
It looks to me that the banking system is skint. Sure, within the thousands of banks some are and some are not. Which are, and which are not, is a question they cannot answer themselves, so they are reluctant to lend to each other. It is very unlikely to be just 76. More importantly, unlike the small banks folding in the 90s this is the big boys.
So what do you do? Borrow more by issuing treasuries at a low yield in a depreciating currency? Print more? Nationalise the banks? Still as confident?
The January situation is discussed at
http://globaleconomicanalysis.blogsp...-negative.html. He calls the graph unprecedented. Unfortunately as of today it has not been updated -
http://research.stlouisfed.org/fred2/series/NFORBRES. It appears to have deteriorated markedly in the last month. That is without considering extending cheap Fed credit to non-banks to prop up the brokers and hedge funds. In the wider scheme of things it may be closer to an acorn than to the sky, however, I daresay there are already some saying some acorn.