Saturday, August 25, 2007

The Fed Bends its Rules

I came across the this article regarding the easing by the Fed of the banking rules which I would encourage you to read. I read it twice to make sure I was hallucinating which, frankly, I wish I was. The Fed is permitting these banks to use 'insured assets' in their brokerage affiliates. The article goes on to state that this was done at the request of the banks ! The equity markets are less than 10% from their all time high ticks and the Federal Reserve is doing this? What am I missing here. Are the credit problems out there much more severe than any of us wish to admit. Dare I say worse than the most pessimistic expectations. This smells like a margin call they cannot meet. Now I may be making this into more than it deserves but I do not see how this can be construed as anything other than a disaster unfolding. I am starting to think that the lines we saw at Countrywide bank may be a harbinger of things to come. Good trading to you all.

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