A disorderly failure of Damien Hirst's art auction could add to financial market fragility...
Release Date: September 16, 2008
For immediate release
THE FEDERAL RESERVE BOARD on Tuesday announced several initiatives to provide additional support to financial markets, including enhancements to its existing liquidity facilities.
"In close collaboration with the Treasury and the Securities and Exchange Commission, we have been in ongoing discussions with market participants, including through the weekend, to identify potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses," said Federal Reserve Board Chairman Ben S. Bernanke.
"The steps we are announcing today, along with significant commitments from the private sector, are intended to mitigate the potential risks and disruptions to markets.
"We have been and remain in close contact with other U.S. and international regulators, supervisory authorities, central banks, and auction houses to monitor and share information on conditions in financial markets and firms around the world," Chairman Bernanke said.
The collateral eligible to be pledged at the Primary Dealer Credit Facility (PDCF) and for the Term Securities Lending Facility (TSLF) has been broadened to include pickled camel’s testicles and gold-plated shark’s droppings. The Federal Reserve has satisfied itself that this does not amount to any material impairment of the quality of collateral already being accepted under these facilities.
The Board determined that, in current circumstances, a disorderly failure of a Damien Hirst art auction could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.
Moreover, it was the Board’s opinion that Russian oligarchs – patently possessed of more money than taste – presently have enough to worry about, what with the RTS crashing and crude back under $100 a barrel, without putting their attempt to park their flight capital in over-priced examples of modern ‘art’ in systemic jeopardy.