Globally Coordinated Bailout of Just a Few Days Ago Is Already A Failure

As has been noted recently, the half life of interventions is decreasing and the recent Globally coordinated Central Bank lifeline that was thrown to Europe this week sending stocks flying higher is already seen as a failure as the ECB releases new data today on the deposit facility and marginal lending facility.

From the Wall Street Journal 

Use Of ECB Deposit Facility Again Hits New 2011 High Thursday

Use of the European Central Bank's overnight deposit facility rose Thursday, setting a new high for the year for the second day in a row as tensions in the euro zone's money markets persisted.

Use of the deposit facility, which pays a 0.5% interest rate, rose to EUR313.763 billion, even higher than the EUR304.42 billion recorded the previous day. The ECB data suggest that the recent efforts of central banks around the world to ease market tensions by making emergency U.S. dollar loans cheaper hasn't yet calmed nerves on the euro zone's money market.

The deposit level has been elevated since early August, as banks favor using the ECB as a haven for excess cash rather than lending it to each other, as they remain reluctant to do so on concerns about counterparties' exposure to risky euro-zone sovereign debt.

Meanwhile, banks borrowed EUR8.64 billion from the ECB's overnight lending facility Thursday, which charges a punitive 2% interest rate. The level is higher than the EUR4.638 billion borrowed Wednesday and the highest level of borrowing at the overnight facility since March 1, when banks borrowed EUR15.104 billion from the facility.

When the interbank market works properly, banks use the lending facility to borrow just a few hundred million euros overnight. But many banks are at present forced to turn to the ECB for their short-term funding needs as the debt and banking crisis continues to erode banks' confidence in one another.

In other words, this is updated data since the "bailout" this week, it shows even worse deterioration then before the "bailout this week".  The ECB deposit facility has risen to a multi year high, showing that the intrbank liquidity freeze is worse then it was before the central banks' action this week and most stunningly was that the record usage of the deposit facility went back to March of this year before the Centrals' bank move, a day later it reached multi-year highs as banks seek out protection for their money which would otherwise in a healthy market environment, be lent to other banks at a higher interest rate.

In addition to a $USD dollar shortage, there remains a Euro shortage as the banks borrowing from the ECB's discount window surged from $4.6 to $8.6 billion overnight. In essence the excess cash being parked at the ECB by stronger banks is being borrowed at a 2% interest rate by the weaker banks.

Bottom line, the Central Banks' coordinated move to ease the liquidity crunch in Europe did nothing and only a few days later as we can see by today's updated ECB usage report, the situation has deteriorated faster then anyone expected.