Lee Adler, Wall Street Examiner wrote:
The Fed was hit with withdrawals of $83.3 billion last Wednesday, the
largest withdrawals from its deposit accounts that were not associated
with quarterly tax payments since February of 2009. $7 billion of that
was the net cash transferred to the US Treasury from its note and bond
sales less outlays. The Fed still had to meet the other $76
billion. These transactions were revealed in the Fed’s weekly H.4.1
report.
The Fed was apparently forced to take extraordinary measures to fund
these withdrawals. These included the outright sale of nearly $24
billion in its Treasury note and bond holdings from the System Open
Market Account. As a result, the Fed’s System Open Market Account
(SOMA) fell to $2.611 trillion, some $43 billion below the Fed’s
stated target of $2.654 trillion. Prior to this week, it had not
strayed from by more than $7 billion since June. The Fed’s action was
not only a direct contradiction of its stated policy, but it was done
without warning or explanation. It ran counter to Bernanke’s penchant
for telegraphing every important move the Fed makes so that the
banking/speculating organizations can front-run it.
The Fed took another unusual and virtually unprecedented action to
fund these massive withdrawals. It borrowed $43 billion from foreign
central banks (FCBs) through Reverse Repurchase Agreements (revese
repos, or RRPs).
Fed Reverse Repos Chart
The Fed’s commitments of reverse repurchase agreements, where it
pledges its securities holdings in return for cash loans, bulged by a
record amount to a record level. The magnitude of this action is
unprecedented.
These RRPs were done with FCBs. There were no open market operations
with the Primary Dealers or Tri-party RRP participants reported in the
NY Fed’s daily postings, or in the H41.
This borrowing and the sales of the Treasuries covered all but $10
billion of the withdrawals. The Fed issued currency to cover about $7
billion, and covered the rest with minor adjustments to other
accounts.
This action was such a surprise and done with such stealth, that
apparently I am the only person in the in the known universe, who
writes regularly about the Fed, who noticed it. I could find no
coverage of it anywhere this weekend, either in the mainstream Wall
Street lackey press, or in the financial wackosphere, of which, like
it or not, I am a member. Since I know that I’m not that smart and the
big boys at the Wall Street Urinal are, I have to assume that there’s
nothing going on here… (Uh… Not).
One other surprise item on this week’s Fed H41 was the U-turn in
foreign central bank buying, which I suspect is related to these
withdrawals. After 7 weeks of record selling of their Treasury
holdings, the FCBs last week did an about face and made record
purchases, reversing much of their recent selling. The dollar rose
sharply on Tuesday and Wednesday. I covered the details, with charts,
in the Wall Street Examiner Professional Edition Treasury update
(Rising Cesspool Lifts All Floaters).
Whether there’s any relationship between these gigantic FCB actions
and the giant withdrawals from the Fed’s deposit accounts, I can’t
say. Unfortunately, I’m not one of the Fed’s fair haired boys to which
they like to leak inside information. For that, your business card
must include the magic words– Wall Street Journal, New York Times, or
Washington Post.
I actually did put in phone calls to Michael Derby at the WSJ, and
Greg Robb at Marketwatch, but it was late in Friday afternoon, and
neither returned my call. It will be interesting to see if, and what,
they report as a result of my calling this to their attention. They
obviously have the inside contacts which I do not and I was hoping to
glean some information from them, or to tip them to what might be a
story worth pursuing. I wait with baited breath to see if anything
comes of these contacts– Or maybe a press release from the horse’s
mouth (cue visual- horse’s backside) itself.
Until then, I don’t know whether this is some kind of technical
adjustment, however big, or a sign that the wheels might be beginning
to come off the world financial system. Given what’s going on with
countries and brokerages going bankrupt and internet coupon companies
setting the investing world on fire, it’s difficult not to suspect the
latter.
We’ll have to see what hits the fan this week. If no reports show up
in the mainstream media, rather than concluding that there’s nothing
here, I would tend to suspect that there is, and that the reason
there’s no reporting is that the Fed does not want us to know. I’d
infer from that that Dr. Bernankenstein has lost control of his
monster.
http://wallstreetexaminer.com/2011/11/0 ... rows-cash/