We have to watch the details of how they actually do this:
Coronavirus aid bill includes $3,000 for families, $4 trillion liquidity for Fed: Mnuchin https://t.co/rxU0CZyISx pic.twitter.com/yaYSCFhePY
— Yahoo Finance (@YahooFinance) March 22, 2020
If they plan to have the Fed just "inject!" or "pump in!" $4T of new Reserves then Depositories are going to need either 1. significant regulatory modifications or 2. about a $400b addition of regulatory capital...
4 comments:
Can Mnuchin dance? Then he can "pump up the jam" ...
Nobody's sure of the injection total yet:-
https://www.cbsnews.com/news/coronavirus-and-economy-best-and-worst-case-scenarios-60-minutes-2020-03-22/
unk,
interesting..
"Neel Kashkari: They are right now. Now, we're hearing from big businesses across the country, including in Minnesota, that big businesses are drawing down their credit lines. They're borrowing money from the banks just because they're nervous. And if they're all drawing down these credit lines at the same time, it puts stress on the banking system.
And that's where the Federal Reserve steps in to provide that liquidity to make sure that the banks have enough money to get out to their customers."
So they think they have to put the Reserves in FIRST so "banks have money to lend out!" ...that is what they appear to be doing..
If this is what they are doing then Were going to keep going down until they bankrupt all the banks again and have to add capital via fiscal...
Banks dont have enough capital at 2T to support near immediate addition of $4T of non-risk Reserve assets... if they do it this way...
$4T is about 25% of what banks have as risk and available for sale non risk assets...
so i'd estimate (Fermi) about a 25% drop in prices from where we already are here at Dow 19,000 if they do this....
maybe Dow 14,000 or so...
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