How Bad Was It, Part 2


How dire were the straits in the latter half of 2008 and the first half of 2009? Consider the following two paragraphs from a Financial Times story posted this evening:


More than 36 per cent of the cumulative collateral pledged to the US central bank in return for overnight funding under the Primary Dealer Credit Facility was equities or bonds ranked below investment grade. A further 17 per cent was unrated credit or loans, according to a Financial Times analysis of Fed data released this week.

Only 1 per cent of the collateral was Treasury bonds which are normally used in transactions between banks and the monetary authorities.