Final Window Dressing Is In- Toxic Financials...

I was very eagerly awaiting this information today. Some of you may recall the F_E_D's newer RRP (Reverse Repo Facility) that banks have been using the VERY last day of either the month or more often, the quarter to make their financial condition appear healthier than it is by renting treasuries (high quality collateral) from the F_E_D for a SINGLE DAY, which is the last day of the quarter clearly for Window Dressing to fool investors in to thinking the banks are healthier than they are and to "fool" their regulators who happen to be the same people lending them these assets in the first place.

When the F_E_D first introduced the RRP facility it was under the auspices of helping as a policy tool when it comes time to hike interest rates, but it has been shown to be ANYTHING BUT.

Back in January before we really caught on to what was going on with the new facility, the usage was $140 bn dollars. We really noted the use of the F_E_D's RRP program , supposedly a tool for hiking rates when the time comes , at the end of April this year when it set the second highest usage ever on the last day of April , month end window dressing.

From there, it became evident that the banks are not in the financial condition they portray by borrowing collateral from the F_E_D for a single day, and the highest usage is always at quarter's end, specifically the very last day of the quarter.

So we started paying more attention and found that Q2's June 30th, saw the usage of the RRP facility go up to a new record usage of $340 billion dollars spread among 97 institutions, 1/3 of a trillion in collateral shortfalls and all of this to fool investors and regulators, except regulators are the same ones loaning the bank the assets for a single day.

Naturally with today being the last day of Q3, I was very interested in what would happen with the Reverse Repo facility as this is the last day for quarter end window dressing.


Not long ago the F_E_D CAPPED the usage of the RRP at $300 bn and on September 17th, they announced that on September 30th, unlike all other days they conduct reverse repos between 12:45 and 1:13, Sept. 30th (today) would be conducted at 8 a.m. - 8:30 a.m. EDT, the only thing special about today vs any other day they conduct the operation is today is the last day of the quarter with a facility that clearly was never meant to be an interest rate hiking tool, but a bank window dressing tool.

I was expecting the entire $300 bn allotment to be taken up as the previous quarter's bank window dressing set a new record, to many people's shock and disbelief, the usage of the Reverse Repurchase Facility today reached a new record high, above and beyond the F_E_D's own $300 bn cap of a stunning $407.167 BILLION dollars, creeping up on half a trillion in collateral shortfalls at the banks. In addition the normal 5 basis points for using the program came in today at a spread of between 5 bps to a negative -20 bps.

Tomorrow the assets will be repurchased by the F_E_D, the banks will have completed window dressing and appear to be in better shape than they are, if only for a day and the regulators will be fooled, who happen to be the F_E_D!

There are a lot of reasons I like FAZ, 3x short Financials, but I think you can safely add this to the list of net negatives for the banking sector.



Interestingly about 2 weeks ago