Bank Index - reading the tea leaves

FED FIX - Reading the tea leaves

After the FED takes in junk collateral for high grade treasuries yesterday, the market responded with a huge rise. I wonder what the difference is today? The swap temporarily offers the banks the ability to sell treasuries that the public is asking for. It gives the FED a way to utilize the off balance sheet junk investment vehicles that no one will buy. But what happens after the 38 day loan is over? Do they have to take back the junk given the FED as collateral? And if so, do they then have to declare it on their balance sheet and subsequently report more huge write downs? or will the FED take on the effort to dispose of this junk at firesale prices?

$BKX - SharpCharts from StockCharts.com: "$BKX". It was up yesterday and having second thoughts today. Any benefit from this attempt at providing liquidity will take 60 to 90 days or more to show up in the critical leading economic indicators that will point to a recovery. Watch for more bad financial sector news and a further downturn in the market.

Courtesy of Norton West