We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.

The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.

These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.

When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?

Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.

Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.

Home / Markets / Industries / Energy

Tuesday, July 08, 2008

Chesapeake Energy Corporation Announces Common Stock Offering

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Comtex

OKLAHOMA CITY, Jul 08, 2008 (BUSINESS WIRE) ----Chesapeake Energy Corporation (NYSE:CHK) today announced that it intends to commence a public offering of 25 million shares of its common stock. Chesapeake intends to use the net proceeds from the offering to temporarily repay outstanding indebtedness under its revolving bank credit facility which it anticipates reborrowing from time to time to fund its recently announced drilling and leasehold acquisition initiatives and for general corporate purposes. The common stock will be offered pursuant to an effective registration statement filed with the Securities and Exchange Commission. The company intends to grant the underwriters a 30-day option to purchase a maximum of 3.75 million additional shares of its common stock.

Lehman Brothers Inc. and UBS Investment Bank will act as joint book-running managers for the offering. The offering is being made only by means of a prospectus and related prospectus supplement, copies of which, when available, may be obtained by mail from the offices of Lehman Brothers Inc., c/o Broadridge, Integrated Distribution Services, 1155 Long Island Avenue, Edgewood, NY 11717, by fax to (631) 254-7140, by telephone to (888) 603-5847 or by e-mail to qiana.smith@broadridge.com; or by mail from the offices of UBS Investment Bank, Attention: Prospectus Department, 299 Park Avenue, New York, New York 10171 or by telephone to (888) 827-7275. An electronic copy of the prospectus supplement will be available on the website of the Securities and Exchange Commission at www.sec.gov.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or country in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state or country.

Chesapeake Energy Corporation is the third-largest producer of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and corporate and property acquisitions in the Fort Worth Barnett Shale, Fayetteville Shale, Haynesville Shale, Mid-Continent, Appalachian Basin, Permian Basin, Delaware Basin, South Texas, Texas Gulf Coast and Ark-La-Tex regions of the United States.

SOURCE: Chesapeake Energy Corporation

Chesapeake Energy
   Corporation Jeffrey L. Mobley, CFA, 405-767-4763 Senior Vice President - Investor Relations and Research jeff.mobley@chk.com
   or Marc Rowland, 405-879-9232 Executive Vice President and Chief Financial Officer marc.rowland@chk.com

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