Source

We just made sure that anyone who was long into Options Expiration - which is tomorrow - especially on index options which cannot be hedged or traded now, is screwed.  Just like in August of 2007 when we did the opposite.

The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window
lending programs.

Of course we couldn't wait until Friday after the close when it wouldn't hose people - instead, we timed this for maximum pain.

Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve's lending facilities. The
modifications are not expected to lead to tighter financial conditions
for households and businesses and do not signal any change in the
outlook for the economy or for monetary policy, which remains about as
it was at the January meeting of the Federal Open Market Committee
(FOMC). At that meeting, the Committee left its target range for the
federal funds rate at 0 to 1/4 percent and said it anticipates that
economic conditions are likely to warrant exceptionally low levels of
the federal funds rate for an extended period.

We gave no warning either.  Ha ha.  You did wear your titanium plate in your pants, right?

The changes to the discount window facilities include Board approval of requests by the boards of directors of the 12 Federal Reserve Banks to increase the primary credit rate (generally referred to as the
discount rate) from 1/2 percent to 3/4 percent. This action is
effective on February 19.

That's "right now", in case you didn't figure it out yet.

In addition, the Board announced that, effective on March 18, the typical maximum maturity for primary credit loans will be shortened to overnight. Primary credit is provided by Reserve Banks on a fully
secured basis to depository institutions that are in generally sound
condition as a backup source of funds. Finally, the Board announced
that it had raised the minimum bid rate for the Term Auction Facility
(TAF) by 1/4 percentage point to 1/2 percent. The final TAF auction
will be on March 8, 2010.

This is something we did warn about, and in addition we're giving notice.  See?  Hope you don't get a margin call in the morning - BOOYA!

Easing the terms of primary credit was one of the Federal Reserve's first responses to the financial crisis. On August 17, 2007, the Federal Reserve reduced the spread of the primary credit rate over the
FOMC's target for the federal funds rate to 1/2 percentage point, from
1 percentage point, and lengthened the typical maximum maturity from
overnight to 30 days. On December 12, 2007, the Federal Reserve created
the TAF to further improve the access of depository institutions to
term funding. On March 16, 2008, the Federal Reserve lowered the spread
of the primary credit rate over the target federal funds rate to 1/4
percentage point and extended the maximum maturity of primary credit
loans to 90 days.

See above.

Subsequently, in response to improving conditions in wholesale funding markets, on June 25, 2009, the Federal Reserve initiated a gradual reduction in TAF auction sizes. As announced on November 17,
2009, and implemented on January 14, 2010, the Federal Reserve began
the process of normalizing the terms on primary credit by reducing the
typical maximum maturity to 28 days.

The increase in the discount rate announced Thursday widens the spread between the primary credit rate and the top of the FOMC's 0 to 1/4 percent target range for the federal funds rate to 1/2 percentage
point. The increase in the spread and reduction in maximum maturity
will encourage depository institutions to rely on private funding
markets for short-term credit and to use the Federal
Reserve's primary credit facility only as a backup source of funds. The
Federal Reserve will assess over time whether further increases in the
spread are appropriate in view of experience with the 1/2 percentage
point spread.

This is something we said we'd do, but heh, you gotta love our timing.  We make a practice of burning people - a few years ago it was the shorts (who were right), this time it's the longs (who
were also right - well up until this evening!

BTW, I shorted the close on the technicals in the futures (which if this reverses I can hedge and of course can't lose on now) - the market was heavy and it looked overbought, so you'd think I'd be
happy. 

I'm not - this sort of action, whether I personally make money or lose money, is not the point.  The point is that this release was intentionally timed to hurt people, just as was the August 2007 one.

Bernanke and his pals ought to be run out of town on a rail for this sort of repeated abuse.  They seem to think that the markets are their plaything, and all they're doing is destroying
confidence with each and every move of this sort.

It is not what you do, it is how you do it, and this sort of thing is just yet another reason why The Fed must be audited.  The timing on this is too damn suspicious - never mind that someone sold a metric ton of SPY right in front of the announcement - literally by seconds, 2 million shares were unloaded.

Betcha you can't find a cop.