The Fed is Under Attack (And No, It's Not Me This Time)
While the Fed is busy shaking its own hand over its newly-discovered commitment to transparency, it's also buckling down for war. The unwashed masses banging down the fortress demanding answers? Nope. Lathered-up protesters hauling around End the Fed signs? Nah. Congressional idiots who have finally learned how to harvest brain cells in Petri dishes and insert them into their empty skull cavities? Haha, yeah right.
Revealing the particulars of the Fed's Maiden Lane holdings (I, II, and III for those of you playing along at home) has left a giant gaping wound right in the Fed's gut and you better believe the rest of the world is going to go right for the infectious weak spot.
While much of the Fed-watching contingent considered their upcoming Monday meeting a discount rate pow-wow (thanks to the Fed's own carefully-crafted announcement, obviously), JDA isn't afraid to wildly speculate nor put her neck out and say this is a strategy meeting more than anything else. As in defenses up and weapons ready for the assault that is about to be aimed directly at our esteemed central bank as a direct consequence of details revealed in the Maiden Lane release this past week. Wow that AIG thing really didn't work out in our favor did it?
Anyway, he Fed announced the meeting yesterday (and maybe they were hoping that the April Fools would be too busy pulling pranks to notice):
It is anticipated that a closed meeting of the Board of Governors of the Federal Reserve System at 11:30 a.m. on Monday, April 5, 2010, will be held under expedited procedures, as set forth in section 26lb.7 of the Board's Rules Regarding Public Observation of Meetings, at the Board's offices at 20th Street and C Streets, N.W., Washington, D.C. The following items of official Board business are tentatively scheduled to be considered at that meeting.
Meeting date: April 5, 2010
Matters to be Considered:
1. Review and determination by the Board of Governors of the advance and discount rates to be charged by Federal Reserve Banks.
A final announcement of matters considered under expedited procedures will be available in the Board's Freedom of Information and Public Affairs Offices and on the Board's Web site following the closed meeting.
Do you think it's coincidence that the generals choose a European bank holiday (the Monday after Easter, duh) to have a pow-wow on how to stop the global assault that is about to be launched directly at them (and, subsequently, the US dollar)?
Come the fuck on, since when is the discount rate an important enough matter to summon everyone to 20th and Constitution for tea time at the temple? Please. You actually bought that?
Listen, Maiden Lane was the playbook and now it's in the enemy's hands. Shame, too, since it was supposedly meant to tame the angry mob of taxpayers but they're generally too blind and stupid to care/understand. How dare I say that? Aren't they the ones who elected the idiots who gave Hank Paulson a job at Treasury and voted for TARP? That's what I thought.
Anyway, it reveals that the Fed has its hands tied (though we totally knew that) and can't possibly raise interest rates as it is unhedged on these piles upon piles of garbage rotting on its balance sheet. The difference being that we now have a more detailed picture of the make-up of the garbage whereas before we only had a vague outline of garbage to go on.
Here comes the flood of crap bonds, hope everyone is buckled in for the stampede.
Hint: Those "foreign investors" really don't like Treasurys after all.