Hilarious / Terrifying Graph of Lending from Federal Reserve To Banks

Industry Figure Bill Standley sends a graph, sourced from no less than the Federal Reserve itself, showing (as the blue line) the amount of lending from the Fed to bank-like institutions over the last century or so. The grey bars indicate recessions.

Note the incredible L-shaped finale:
Total Borrowings of Depository Institutions from the Federal Reserve Through June, 2008
Snapshot above is through May, 2008. Click here for updated, even scarier Scary Graph.

Whoa, that’s pretty awesome. Observe the relatively small amount of Fed lending associated with, say, the aftermath of 9/11, or the Federal Savings and Loan Fiasco or the Stock Market Crash of the 1980’s.

And then look at what’s happened in the last month.

What’s going on? The Fed has agreed to a debt swap with banks. The Fed gives the banks highly-liquid T-bills, and in return, the banks give the Fed “collateral”:

…the Federal Open Market Committee authorized an expansion of the collateral that can be pledged in the Federal Reserve’s Schedule 2 Term Securities Lending Facility (TSLF) auctions. Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations, beginning with the Schedule 2 TSLF auction to be announced on May 7, 2008, and to settle on May 9, 2008. The wider pool of collateral should promote improved financing conditions in a broader range of financial markets.

Translation: The banks can use their crappy non-performing real-estate CDOs for collateral, and in return, the Fed gives them delicious, highly-liquid T-bills at a cost of 2%/year. So naturally banks are rushing to take advantage of this in droves, to the tune of several hundred billion dollars.

Now, whether you think that this a good action by the Fed or not, consider that the Fed believes it to be necessary. They’re not eediots; the fact that they have made a move this large indicates how large they think the problem is.

Seriously, hold on to your hats; it’s going to be a bumpy ride.

Eye News #11 – Nothing to See Here

I got around to going to my retinal specialist again yesterday (oog, it’d been 2.5 years since the last time), and everything was pretty stable: the interocular pressure was 17-left, 24-right, just about exactly where it had been the last time, and my vision was still fine, although my left eye (the one that exploded in 1976) has a tiny, cute little cataract, which has gotten vaguely worse over the eight or so years that we’ve been tracking it, to the point where my best vision is in my evil, Y2K-explody eye — though I’m still totally legal to drive, on the strength of the left (worst) eye alone.

My retinal specialist said that things were so stable that I could cut back to seeing him annually, which would still be about 2.5x more often than I’ve been going.

Oh yeah, and the staff at his office made a huge fuss about how much weight I’d lost, more than 65 pounds since when they knew me well:

“You look…fantastic!”

Housing Price Bust…Getting There!

I’ve written before, a few times, that only the most pessimistic estimates for where the median home prices would end up sounded even close to me. So, where I live, in Southern California, I was looking for prices to fall from their high of $505K to about $303K, a drop of 40%.

And…we’re getting there! Banks, at least, are finally capitulating in a big way, and buyers are returning. Industry Figure Larry Helmerich points out an article in Thursday’s Los Angeles Times, which shows that statewide in California (note that we’ve just gone from discussing oranges to apples), the median price has fallen 30% from its peak of $484K in May 2007 to $339K in May 2008, with about 38% of sales statewide coming from foreclosures.

“All of a sudden, [homes] are in our price range,” said Elizabeth Trezza, a paralegal in Oakland.

Trezza has been on the hunt for a foreclosed property and placed offers on at least six in recent weeks.

The 24-year-old made an offer Tuesday on a two-bedroom, two-bath bank-owned home in Oakland listed at $234,000 — just below her maximum spending limit, $250,000.

“Right now our mortgage would be relatively close to what we pay for in rent,” she said.

If Southern California homes have fallen the same 30% from their peak (moving back from apples to oranges), then they’ll have fallen from $505K to about $354K — still too high, but getting there.

Whether we’ve fallen as much is anyone’s guess. The hardest-hit markets are those out in the boondocks (e.g. Temecula), where high oil prices are taking a huge toll on residents, who often accept terrible commutes in order to find an affordable home. Plus, we’ll still have to work through all the buyers from the last four years who would find themselves under water at today’s prices — if they want to sell, they either have to get their lender to accept a short sale, or else wait until they can find that one extra-special crazy buyer with the moneybags.

Read the full article in the Los Angeles Times.
“Median home price in California drops 30% in May”
June 19, 2008

Barack Obama Fundraising Goal

I thought that I’d get involved, for once, and volunteered to raise $500 for Barack Obama’s campaign. The idea of a third consecutive term of the policies of George W. Bush makes me want to vomit, so for me, at least, the choice is clear.

And really, I can’t think of a better point to make than McCain’s repudiation of the recent Supreme Court decision reaffirming the centuries-old right of habeas corpus.

(And when I say “centuries-old”, it actually was part of British common law by the time of the Magna Carta in 1215 — that’s old)

McCain is against it; Obama is for it. There’s no starker contrast than that.

If you were thinking about donating, or donating more, to the Obama ’08 campaign, you’ll help me reach my goal if you use this link. You’ll ultimately end up on Obama’s site to make your donation, but I’ll get credit (“Attaboy!”) for having gotten you there.

It doesn’t have to be a whole lot of money; one of the main tenets of Obama’s candidacy is raising money from a lot of little donors, rather than a few huge donors.

DRM Worst-Case Scenario

Microsoft is [obviously] not going out of business any time soon, but it’s gotten to be just too much of a hassle for them to continue to support their PlaysForSure Digital Rights Management scheme that they pushed on device manufacturers and customers for years, before deciding that it wasn’t good enough for their own Zune.

They’ve notified their customers that no new authorizations for playing a given song on a given PC or a given device will be issued after August 31, though any existing authorizations will continue to work, as long as you’ve started to play the song at least once on the existing PC or device, and haven’t had to reinstall Windows, or purchased a new PC or device that you were hoping to play music on. Enjoy!

(“So, everybody run out and buy a Zune! We’ll never screw you over a second time!”)

One customer posted the text of the letter, along with his “snarky translation of the meaning”:

“MSN Music is constantly striving to provide you, our user, with the most compelling music experience that we can. We want to tell you about an upcoming change to our support service to ensure you have a seamless experience with the music you’ve downloaded from MSN Music.”

Translation: We’ve got bad news that’s really going to piss you off, and we need to soften you up first…

Read the full Dear-John Letter from MSN Music, and Translation