October 29, 2007 (LPAC)--Earlier this morning, an LPAC contributor tipped us off to a very peculiar financial event. According to a report on October 28th by a financial blog named Market Ticker, an unknown bank, on October 25th, took a loan from the New York Federal Reserve's "Federal Funds Market" for an un-heard-of interest rate of 15%. Normally this typical, "overnight", short term loan, has a negotiated rate, the target being set by the Federal Open Market Committee, currently sitting, (soon, might be lowered again!), at 4.75%. Depending on the collateral offered, other factors, and market "confidence," the rate of 4.75% is not fixed in stone, but fluctuates, a negotiated rate between the two parties, debtor and creditor.

This could mean, very simply, that the collateral (worthless financial paper) offered by the borrowing institution was deemed so worthless by both the Fed and the "market", that the borrowing institution was forced to take the loan (rumored to be about $75 million) at a 15% (!) interest rate, a rate typical of "credit card money."

Currently we are investigating this lead, and should have an updated picture tomorrow.

The rate of 15% was verified by the New York Federal Reserve's website (see 10/25, in the "HIGH" column), and was already checked for accuracy. Yes, its not a typo.