Jim’s Rant For The Day. Personal Observation on Bill Holter Interview.
When I was in my mid twenties, I was a bank commercial loan officer for about four years. Part of my duties was to buy and sell excess bank money each day. I would borrow excess cash from smaller banks and lend it to a larger bank, just overnight (called Overnight Repos). All of this was to increase our earned interest.
When I heard Holter tell about the woman commanding her bank to wire $50 Million to a vendor h tells that it was three days of the bank stalling to wire the funds.
My experience tells me that the banking chain combined did not have the $50 Million available and had to run around to larger banks to borrow the funds from them. This is called “Participating” the transaction.
But here is what took so long. The other banks had to see how many were willing to lend money to the paying bank. Then they all had to get together and determine if they together thought the paying bank was worthy of repaying a long term loan of $50 Million. In other words, the participating banks wanted to know if the paying bank was worthy of their loan and how and when could they pay back that loan.
So what happened is the participating banks needed to know if their money was safe in the paying bank or would they themselves be trapped in a bank run and get stiffed!
My guess is the paying bank found no participating banks unless the Federal Reserve guaranteed they would buy those loans in the Fed Reserve Repo program.