This is a very interesting graph showing how much money banks have available for lending and in reserve.

If you notice, they don’t have any. In fact, they have what looks to be around -10 billion dollars in reserve.

Normally this gets you shut down right quick. But there’s a nifty program the Fed runs that lends banks money, called Term Auction Facility (TAF).

TAF lends banks a lot of money at a very low interest rate. They will take any old thing as collateral and value it way higher than it’s worth. And it’s completely anonymous.

Currently there are 52 banks borrowing 40 billion dollars to keep afloat. Nobody knows which banks, whichI assume is deliberate.

The big questions for the following few days are -

Will MBIA and AMBAC (Bond insurers) get downgraded? They’re largely fucked, but if they’re downgraded, everyone who uses them is fucked. Like 140+ billion fucked. Like Municipal bonds, banks, and more, all get downgraded as well.

I don’t believe they’ll do the right thing and downgrade them. It”ll cause too much damage, and the plate spinning must go on.

In a similiar vein, Do we get more rate cuts? They’ve been betting on it all week but today people don’t seem as positive. Once again, not a good thing but more of an expected outcome. Can’t have any reality in our financial markets.

Here’s a much more educated and better explanation of what’s actually going on.