02 04 08 The Fed In Space
On Monday there were a few comments from Treasury Secretary Paulson in regards new regulatory proposals and the potential for increased powers at the Federal Reserve bank. This one in particular:DJN: *DJ Paulson: Fed Should Go Wherever `It Thinks It Needs To Go`got us to thinking.....
queue music...
CDOs...
the final frontier...
these are the voyages of the Starship Fed...
our open-ended mission: To explore strange new structured products
To seek out hidden risk and astronomical losses
To bodly go wherever the fuck we think we need to go!
starring....
Hank Paulson as Capt. Kirk
Ben Berspankme as Spock
Jim Cramer as Dr. McCoy
and an assortment of red shirts from Wall St.
The Doomsday Machine
special guest Alan Schwartz as Commodore Matt Decker
...scene opens on the heavily damaged BSC...
[Kirk] Matt. It's Jim Kirk.
[McCoy] Commodore? Commodore Decker?
[Kirk] Matt? Matt.
[Decker] Kirk. It's Jim Kirk.
[Kirk] What happened to your bank, Matt?
[Decker] My bank ... Attacked! That -- That thing.
[Kirk] What was it?
[Decker] That --
[Kirk] Answer me! What was it? What happened, Matt?
[McCoy] Jim, give him a minute. He's in a state of shock.
[Scotty] Ready with the duplicate log, sir.
[Kirk]Go.
[Matt Decker] CEO's Log -- Feddate 4202.1.
Exceptionally heavy market interference
still prevents our contacting Fedfleet
to inform them of the destroyed CDO tranches we have encountered.
We are now funding CDO L-374.
Risk Management Officer Masada reports the equity tranche is breaking up.
We are going to investigate.
(pause)
The equity tranche. Only two tranches left now.
[Kirk] Scotty, beam the microSD to Spock.
I want a complete report of what happened
when they tried to fund that CDO.
[Decker] We tried to contact Fedfleet.
Uh, no one heard. No one!
We couldn't fund.
[Kirk] What happened to your crew?
[Decker] I had to cut their pay.
We -- We were dead.
No liquidity, our repos useless.
I stayed behind, the last man.
The CEO, the last man in the bank.
That's what you're supposed to do, isn't it?
And then it hit again
and the, uh, credity facility went out.
They were down there, and I'm -- I'm up here.
[Kirk] What hit? What attacked you?
[Decker] They say there's no devil,Jim, but there is.
Right out of hell, I saw it.
[Kirk] Matt, where's your staff?
[Decker] Funding the third trache.
[Kirk] There is no third tranche.
[Decker] Don't you think I know that?
There was, but not anymore.
They called me. They begged me for liquidity,
400 of them! I couldn't. I -- I couldn't.
[Scotty] Captain, Washburn has our report.
[Kirk] Go.
[Scotty] We made a complete check on structured products and CPDO's.
As far as we can tell, something crashed through the debt covenants
and knocked out the credit facilities.
Somehow the liquidity in the short term lines has been deactivated.
[Kirk] Deactivated?
Scotty, could some kind of general liquidity dampening field do that,
and would the same type of thing account for the heavy market interference?
[Scotty] Aye, that all adds up.
[Kirk] What thing could do all that?
[Decker] If you'd seen it, you'd know.
The whole thing must be a weapon.
[Kirk] What does it look like?
[Decker] Well, it's -- it's miles long,
with a maw that could swallow a dozen boutique investment banks.
It destroys collateral and balance sheets, rips them into pieces.
[Kirk] What is it, a commercial bank? Or is it a government agency --
[Decker] Both or neither. I don't know.
[Kirk] Matt, your log stated
that the fourth tranche was breaking up.
You went in to investigate.
[Decker] We saw this thing hovering over the debt,
slicing out chunks with a force beam.
[Kirk] What kind of a beam?
[Decker] Pure anti-liquidity. Absolutely pure.
[Beep Beep]
[Kirk] Kirk here.
[Spock] Spock here, Captain.
Unable to raise Fedfleet Command
due to heavy market interference.
Attempting to remedy.
[Kirk] What about the BSC's tapes?
She was attacked by what appears to be essentially ... a robot,
an automated weapon of immense size and power.
Its apparent function is to smash investment banks to rubble
and then digest the assets for profit.
It is, therefore, self-sustaining
as long as there are investment banks for it to feed on.
[Kirk] A robot weapon that purposely destroys entire financial systems. Why?
[Spock] Unknown, Captain.
Copyright 2004-2008 by Gedanken Experiment (previously Rant Street) except as otherwise noted. Our terms of use are as follows: Content on Gedanken Experiment may not be indexed, cached, reproduced or syndicated in any manner by any party whose purpose is to provide such an index, cache, reproduction or syndication of our content for a monetary fee or other consideration to their clients, customers or users. Content on Gedanken Experiment may not be copied, reproduced, republished, indexed, cached, uploaded, posted , transmitted, framed or distributed in any way, without the prior written permission of Gedanken Experiment, except that a) user may download, display, or print one copy of the materials on any single computer solely for user's use; b) user may briefly quote or excerpt for use in a review or criticism for purposes of illustration or comment or as part of a news report as per fair use guidelines of www.copyright.gov; c) internet search engines which provide the public the ability to search online content at no charge (free) may index and cache content from Gedanken Experiment which is not explicitly blocked by robots.txt; in case (a), (b) and (c) above user agrees to keep intact all copyright, trademark, and other proprietary notices of both Gedanken Experiment and any other third parties mentioned in our content. Modification of the materials or use of the materials for any other purpose is a violation of Gedanken Experiment's, its affiliates', or its third-party information providers' copyrights and other proprietary rights. Nothing contained herein shall be construed as conferring by implication, estoppel, or otherwise, any license or right under any copyright, patent, trademark, or other proprietary interest of Gedanken Experiment, its affiliates, or any third party, except as expressly set forth herein. 02-13-2007