Fed's Direct Loans to Banks Climb to Record Level

Source: Bloomberg

The Federal Reserve's direct loans of cash to commercial banks climbed to the highest level on record in the past week as money-losing lenders increasingly turn to the central bank for funds.

Funds provided through the so-called discount window for banks rose by $2.8 billion to a daily average of $14.4 billion in the week to May 14, the central bank said today in Washington. Separately, the Fed's loans to Wall Street bond dealers rose by $75 million to $16.6 billion.

Policy makers have increased the attractiveness of direct loans as they seek to alleviate the impact of the credit crunch. Fed Chairman Ben S. Bernanke said two days ago that while markets have improved, they remain ``far from normal,'' adding that the central bank is prepared to increase its twice monthly auctions of funds to banks.

``The Fed is providing an extraordinary amount of liquidity through various mechanisms,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. While ``credit markets are showing signs of improvement'' there is ``a long way to go,'' he said.

Fed officials have reduced the cost of direct loans to a quarter-point above the benchmark overnight lending rate between banks. In March, they extended the term of the loans to commercial banks to 90 days. The discount rate is now 2.25 percent, compared with the three-month London Interbank Offered Rate for the dollar of 2.72 percent.

`Good Sign'

``The fact that banks are willing to take advantage of it may be a good sign for the market,'' said Louis Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. ``They're willing to take advantage of cheap money and'' lend it on to customers, he said.

Bernanke today urged banks to raise more capital to help limit damage to the economy. Banks and securities companies have raised about $244 billion of capital since July, after writedowns and credit losses in excess of $333 billion.

Fed policy makers in March created the Primary Dealer Credit Facility to offer direct loans to the 20 brokers that trade Treasury securities directly with the New York Fed. The resource allows Wall Street banks to borrow money at the discount rate overnight.

As of May 14, there was $14.5 billion of loans outstanding in the primary-dealer program, while commercial banks had $13.4 billion of discount-window loans, the Fed reported.

Warming Climate Is Changing Life On Global Scale

ScienceDaily (May 15, 2008) — A vast array of physical and biological systems across the earth are being affected by warming temperatures caused by humans, says a new analysis of information not previously assembled all in one spot. The effects on living things include earlier leafing of trees and plants over many regions; movements of species to higher latitudes and altitudes in the northern hemisphere; changes in bird migrations in Europe, North America and Australia; and shifting of the oceans' plankton and fish from cold- to warm-adapted communities.

"Humans are influencing climate through increasing greenhouse gas emissions, and the warming world is causing impacts on physical and biological systems attributable at the global scale," said lead author Cynthia Rosenzweig, a scientist at the NASA Goddard Institute for Space Studies and the Columbia Center for Climate Systems Research. Both are affiliates of The Earth Institute at Columbia University.

Observed impacts included changes to physical systems, such as glaciers shrinking, permafrost melting, and lakes and rivers warming. Biological systems also were impacted in a variety of ways, such as leaves unfolding and flowers blooming earlier in the spring, birds arriving earlier during migration periods, and plant and animal species moving toward Earth's poles and higher in elevation. In aquatic environments such as oceans, lakes, and rivers, plankton and fish are shifting from cold-adapted to warm-adapted communities.

Rosenzweig and researchers from 10 other institutions across the world analyzed data from published papers on 829 physical systems and some 28,800 plant and animal systems, stretching back to 1970. Their analysis of revealed a picture of changes on continental scales; previous studies had looked mainly at single phenomena, or smaller areas. In physical systems, 95% of observed changes are consistent with warming trends. These include wastage of glaciers on all continents; melting permafrost; earlier spring river runoff; and warming of water bodies. Among living creatures inhabiting such systems, 90% of changes are consistent with warming.

World faces choice between higher energy, food costs: experts

by Staff Writers
Singapore (AFP) May 15, 2008
The world must choose between higher energy prices or rising food costs, experts said Thursday, arguing that the use of farm land to make biofuels was likely to continue amid strong energy demand.

Biofuels are among the factors blamed for escalating global prices of foodstuffs including corn, rice and wheat. The rising cost of such staples has sparked protests in many countries, including in Asia.

Biofuels account for a substantial portion of the fuel produced in non-OPEC countries, so governments, businesses and individuals must decide if they want higher energy prices or more expensive food, the experts said at a Singapore conference.

Oil prices would be 15 percent higher if biofuel production was taken out, said Francisco Blanch, global commodity strategist at Merrill Lynch, Pierce, Fenner and Smith Ltd.

Biofuels such as ethanol can be derived from foodstuffs including corn, soybeans and sugarcane.

Last year, one-third of oil production by countries outside of the Organisation of the Petroleum Exporting Countries (OPEC) cartel came from biofuels and this is projected to increase to two-thirds this year, he said at the conference.

"So if you think that in the next five years we can live without biofuels because governments decide that they are pushing up agricultural commodity prices, it's going to boil down to a decision between eating or moving around," he said.

Diverting farm products to produce biofuels, which power cars, has come under heavy criticism by environmental activists and some government officials, who said it is one of the major reasons for rising global food prices.

China quake toll 'to top 50,000'

More than 50,000 people may have died in the earthquake that devastated parts of China on Monday, state media say.

The warning came after the government confirmed the death toll had risen to 19,500, as rescue efforts continue to search for thousands still trapped.

About 10 million people across Sichuan province have been directly affected by the 7.9 quake, Chinese media said.