{"id":3008,"date":"2008-03-19T12:21:12","date_gmt":"2008-03-19T18:21:12","guid":{"rendered":"http:\/\/karmalised.com\/?p=3008"},"modified":"2008-03-19T12:25:17","modified_gmt":"2008-03-19T18:25:17","slug":"jump-in-the-sharks-have-been-fed","status":"publish","type":"post","link":"http:\/\/karmalised.com\/?p=3008","title":{"rendered":"Jump in – the sharks have been fed"},"content":{"rendered":"

Goldman, Morgan Stanley Use Fed’s Wall Street Window (Update2)<\/font>
\nBy Yalman Onaran and Christine Harper<\/strong><\/p>\n

March 19 (Bloomberg) — Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc.<\/a> said they’ve borrowed from a program created by the Federal Reserve to jumpstart lending amid concern that Wall Street faced a cash shortage.<\/p>\n

“We have tested the window because we want to remove the stigma from the window,” Morgan Stanley Chief Financial Officer Colm Kelleher<\/a> said in an interview today, referring to the Fed lending program. “It’s meant to be there for normal business. It’s not meant to be there as a last-recourse thing.” [Read the report<\/a>]<\/strong><\/p><\/blockquote>\n

Moral hazard<\/font><\/p>\n

Richard Adams, comment is free, 17 March 2008<\/a><\/strong><\/p>\n

There’s a lot more to be said, and yet to be learned, about the decline and fall of Bear Stearns. But the bigger question is this: what will policy-makers and regulators, both in the US and elsewhere, take from it? Are modern financial markets now so complex and intertwined<\/a> that no significant investment bank can be allowed to fail because of the devastating consequences that would ensue? If so – and the Fed seems to think so – then surely governments must take a stronger hand in dealing with financial operations and regulation. For a free market this turns out to have a pretty hefty price tag.<\/p>\n

That wasn’t the only bombshell the Fed dropped at the weekend. In fact, it may be that the Bear Stearns takeover wasn’t the biggest news. The Fed unveiled another of its “money for nothing” schemes – in which the largest investment banks can swap their junk mortgage bonds for the Fed’s cash. It started that scheme last Tuesday, when it injected $200bn into the market. But this time the Fed has said the amount it is willing to lend is open-ended – an invitation for the remaining big banks to clean out their books. It’s anyone’s guess what this will cost in the end, or if it will work. Is piecemeal action like this really the best way to solve an endemic crisis? At this rate the Fed is going to end up holding every useless piece of mortgage security paper going.<\/p>\n

The phrase that we will be hearing soon enough, once the markets have digested the weekend’s events, is this: moral hazard – the idea that economic agents will take greater risks if they think there is a safety net to catch them. (That’s why kids learn to ride bikes with training wheels on.) [Read the commentary<\/a>]<\/strong><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Goldman, Morgan Stanley Use Fed’s Wall Street Window (Update2) By Yalman Onaran and Christine Harper March 19 (Bloomberg) — Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. said they’ve borrowed from a program created by the Federal … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-3008","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/pdXTf-Mw","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"http:\/\/karmalised.com\/index.php?rest_route=\/wp\/v2\/posts\/3008","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/karmalised.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/karmalised.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/karmalised.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/karmalised.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3008"}],"version-history":[{"count":0,"href":"http:\/\/karmalised.com\/index.php?rest_route=\/wp\/v2\/posts\/3008\/revisions"}],"wp:attachment":[{"href":"http:\/\/karmalised.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3008"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/karmalised.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3008"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/karmalised.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3008"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}