OK, now, Wash-Mooooo has been taken to the slaughterhouse and the choicest cuts bought by JP Morgan Chase (full disclosure: I bank at Chase).
Didn’t anyone know that this was going on? Well, of course people did. For example, back in May of this year, William C. Dudley, an Executive VP at the New York Federal Reserve Bank said:
So what has been driving the recent widening in term funding spreads? In my view, the rise in funding pressures is mainly the consequence of increased balance sheet pressure on banks.
And, obviously, “balance sheet pressure” is a nice way of saying trending toward a risk of insolvency.
Of course, the Fed has been acting for a year now like we are facing a liquidity crisis, when we are actually facing a solvency crisis … but if you carefully read an analysis by a fairly senior person in the Federal Reserve System, its all there. What’s up?
Join me below the fold.