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Wells Fargo Bank published interest rates, Friday, October 31"With sources of credit still largely frozen, banks borrowed a record amount from the Federal Reserve in the past week, according to Fed data released Thursday. The Fed reported that commercial banks borrowed a record $111.9 billion a day, on average, from the Federal Reserve's emergency lending window over the past week. That's up $6.1 billion from the $105.8 billion they borrowed in the previous week. "Banks literally have an open checkbook to acquire cheap liquidity," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Council. "Borrowing will continue until morale improves." Investment banks, meanwhile, borrowed $87.4 billion a day, on average, down $23.9 billion from $111.3 billion a week ago. Some analysts believe that investment banks are borrowing less as the federal government gears up its program to invest up to $250 billion in banks.
Meanwhile, legions of financial institutions have turned to the Federal Reserve for funds, as the traditional source of lending from private banks dried up after the collapse of Lehman Brothers in mid-September. "The last resort is always the Fed, and that's where they're going to," McCormick noted. As a result, the federal government has instituted several programs aimed at easing funding concerns for banks and encouraging lending between financial institutions. These include measures such as lowering interest rates, injecting capital into banks and providing insurance on all non-interest bearing accounts. One such program, the Fed's Commercial Paper Funding Facility, has helped lower borrowing rates and provided critical short-term financing to businesses in desperate need of cash. The Fed said it has bought up $143.9 billion in commercial paper since the program began Monday. Many of these programs have only recently come online, and analysts say it will take time for the new initiatives to reduce the lending stranglehold currently gripping banks.
"The unprecedented amount of liquidity coming from the Fed and Treasury will find a home eventually, and that will be good for the market," said McCormick. "It's taking a bit longer than the industry wants, but down the road it will make a significant impact across the board."
Meanwhile, legions of financial institutions have turned to the Federal Reserve for funds, as the traditional source of lending from private banks dried up after the collapse of Lehman Brothers in mid-September. "The last resort is always the Fed, and that's where they're going to," McCormick noted. As a result, the federal government has instituted several programs aimed at easing funding concerns for banks and encouraging lending between financial institutions. These include measures such as lowering interest rates, injecting capital into banks and providing insurance on all non-interest bearing accounts. One such program, the Fed's Commercial Paper Funding Facility, has helped lower borrowing rates and provided critical short-term financing to businesses in desperate need of cash. The Fed said it has bought up $143.9 billion in commercial paper since the program began Monday. Many of these programs have only recently come online, and analysts say it will take time for the new initiatives to reduce the lending stranglehold currently gripping banks.
"The unprecedented amount of liquidity coming from the Fed and Treasury will find a home eventually, and that will be good for the market," said McCormick. "It's taking a bit longer than the industry wants, but down the road it will make a significant impact across the board."
- David Goldman, CNNMoney.com staff writer, http://biz.yahoo.com/cnnm/081031/103008_fed_borrowing.html
So what can we make of this? The Fed's latest interest rate cut brought the rate down to 1%. This week the banks borrowed $778,000,000,000 from the Fed, at 1% interest. Wells Fargo, and the others, want to charge you the rates posted above. Remember many large banks just received a $25,000,000,000 "stimulus" from the Treasury, yet still borrow astronomical sums of money. Does the word "usury" come to mind? But don't YOU dare get behind in those mortgage payments or credit card bills. There are a few other words I'd use right now, but it wouldn't be polite...
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