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Time to Warm Up The Helicopters?
Posted By Barry Ritholtz On August 10, 2007 @ 11:29 am In Credit,Derivatives,Federal Reserve,Psychology | Comments Disabled
A few items worth passing along this morning: The "contained" housing slowdown, and the "contained" subprime issue  have now blown up hedge funds in the US , Australia , England , Germany , and France .
Deals for funding , stocks buybacks are now getting hit, as funding dries up for KKR, Home Depot , Cerebus/Chrysler, etc. The SEC is combing the books of Merrill Lynch and Goldman Sachs, looking to see how accurately the CDOs are priced on their books .
Speaking of intervention, the ECB got the choppers out yesterday, airdropping 94.8 billion in Euros onto the continent. The Federal Reserve announced  they are "providing liquidity to facilitate the orderly functioning of financial markets."
Overnight, Fed Funds Rate had spiked towards 6%, and now after the 2 liquidity injections, are back to the 5.25%
overnight lending rate that is the Fed’s target. Rumor has it that the recent ECB & US Fed injections are now bigger than GDP of Argentina!
A survey from the WSJ  found almost half — 44% — of respondents want a rate cut. (So much for free market economics!)
Are people truly that naive? Do they not understand what rate cuts will do the U.S.Dollar?
Then there is the concept of Moral Hazard . I am int he camp of WIlliam Poole, who has stated that speculators in these markets need to absorb their losses themselves. A rate cut that causes inflation is essentially a "cruelest tax increase."
Fed Issues Statement as It Moves To Reassure Jittery Markets 
DAVID WESSEL, JOELLEN PERRY, MONICA HOUSTON-WAESCH AND GREG IP
WSJ, August 10, 2007 11:10 a.m.
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2007/08/time-to-warm-up-the-helicopters/
URLs in this post:
 Image: http://bigpicture.typepad.com/photos/uncategorized/2007/08/10/ecb_.jpg
 subprime issue: http://online.wsj.com/article/SB118664884606092848.html?mod=hps_us_whats_news
 US: http://www.forbes.com/markets/commodities/2007/08/09/goldman-sachs-alpha-markets-equity-cx_er_0809markets07.html
 Australia: http://www.bloomberg.com/apps/news?pid=20601081&sid=aZMhEKAlAAxg&refer=australia
 England: http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2198037.ece
 Germany: http://www.bloomberg.com/apps/news?pid=20601087&sid=aUAcRJopf57c&refer=home
 France: http://www.marketwatch.com/news/story/bnp-suspends-fund-valuations-amid/story.aspx?guid=%7BE6B2639B%2D407F%2D4383%2DA6EC%2D48872DA48B08%7D
 Deals for funding: http://www.bloomberg.com/apps/news?pid=20601102&sid=a7Xu2dTqmHd0&refer=uk
 Home Depot: http://www.businessweek.com/bwdaily/dnflash/content/aug2007/db2007089_684681.htm?chan=top+news_top+news+index_businessweek+exclusives
 the CDOs are priced on their books: http://online.wsj.com/article/SB118671258265093971.html
 Federal Reserve announced: http://federalreserve.gov/boarddocs/press/monetary/2007/20070810/default.htm
 survey from the WSJ: http://forums.wsj.com/viewtopic.php?t=690&autoredirect=true&sid=05ffcbeda06ce6e5c11cba7981deb554
 Moral Hazard: http://en.wikipedia.org/wiki/Moral_hazard
 Fed Issues Statement as It Moves To Reassure Jittery Markets: http://online.wsj.com/article/SB118673195378094167.html
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