With interest rates currently low, many companies are borrowing funds to repurchase corporate shares.
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The increased price of fixed-rate home loans since then has been driven by the increasing cost of borrowing the funds on the financial markets.
Having the discount rate higher meant that, in normal times, borrowing in the Federal Funds market would be less expensive than borrowing from the Fed.
Tuesday, Treasury Secretary Henry Paulson told the Chamber of Commerce that investment banks should be more closely scrutinized by the Federal Reserve (make that scrutinized at all, really) now that they enjoy the privilege of borrowing short-term funds directly from the central bank, just as commercial banks have been allowed to do for years.
If a run on deposits occurs, they would face borrowing from private sources of funds at penalty rates of interest that would reflect current market realities.
But the ideas that have leaked into the Japanese press suggest that the government intends to obtain funds mainly by borrowing from the state-run postal savings system, and to use them in two different ways.
Some clients did a "cashless exercise" of nonqualified options, borrowing from a broker all the funds needed to exercise and to cover the withholding taxes on exercise.
Pension schemes and mutual funds are constrained from borrowing money.
Borrowing from other banks in the Fed Funds market does not create new reserves for the banking system.
Borrowing from other participants in the Federal Funds market merely redistributes existing reserves.
One way: allow the retirement fund to continue borrowing from the separate disability and Medicare funds, as it is doing this year.
But there is a huge difference between borrowing from the Fed at near zero interest rates and borrowing at that rate in the Federal Funds market.
Instead of borrowing from banks, those in need of funds could issue securities.
Such mutual funds take in money, not by borrowing, but by selling shares of stock.
The deficit in income taxes has been financed by borrowing, largely from the Social Security and Medicare trust funds.
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Italy claimed victory in a deal to allow the rescue funds to buy its bonds and hold down borrowing costs with few strings attached.
Instead, this week it will deal with anonymous quotes as it tries to raise funds in a Wednesday bond auction amid increasing borrowing costs on its debt.
It has long been against the rules for banks to engage in arbitrage by borrowing at the discount rate and lending in the Fed Funds market at a higher rate.
The most obvious way for the Fed to help is to lower the federal funds rate target, which sets the cost of borrowing, from its level of 2%.
If Congress felt that they should not be paying these bills or that there should be less spending and less borrowing, then they should have passed different legislation that appropriated funds.
Back then, the dramatically low federal funds rate was enough to spur a wave of borrowing by companies and individuals, so much so that a series of 17 rate increases followed from June 2004 to June 2006 as the Fed tried to temper inflation in a boom period.
All of the private student loans are certified by schools as part of the approval process to prevent over-borrowing and are disbursed through schools to ensure proper use of loan funds.
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Among the key agreements from the 29 June summit were moves towards banking union with the European Central Bank (ECB) acting as a supervisor and allowing European bailout funds to buy bonds to try to reduce countries' borrowing costs.
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The Polish currency is likely to rise further due to Poland's relatively sound economy, the inflow of foreign funds, and the market continuing to expect more cuts to borrowing costs than the central bank is ready to deliver, said Nomura economist Peter Attard Montalto.
However, during unusual periods of reserve shortages in the banking system, the Federal Funds rate would be bid up above the discount rate and trigger borrowing from the Fed.
Their fears have been doubled because many of these, hedge funds being the most obvious, had taken advantage of ultra-cheap borrowing to leverage these bets.
The larger banks still face high borrowing costs, so they are happy to use the ECB's three-year funds.
And third, the rescue funds should buy long-dated bonds in the primary market to bring down borrowing costs.
Such capital-raising exercises allow founders to cash in their holdings and also give the hedge funds some independence from their prime brokers, on whom they depend heavily when borrowing money.
The ECB first intervened in the market through the SMP, through which the ECB used existing funds to purchase bonds of various member states in an effort to keep their borrowing costs down.
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