Last week 4 large lenders stepped up to the feds discount window and each borrowed 500 Millionon dollars, these banks are Bank of America, Citigroup, JP Morgan chase, and Wachovia. .
The speculation is that their motive was largely symbolic and to calm the market. But what I am thinking is, that they jumped on an opportunity to create arbitrage. The normal discount window is 6.250% and has to be repaid the following day. Here they are presented with a rate of 5.750% and can be repaid in 30 days now thats an opportunity!.
Banks know where to invest their money for a quick profit, and are in the business of borrowing money for less lending money for higher interest so to create a little spread between their expanse and their income and thats called arbitrage!
Now I think we can learn this practice from banks on how to do this ourselves!
Call Me so I can send you some litrature as to how to go about it
Sincerely
Joel Silberstein
