Fed May Take No Losses on Emergency Programs: Dudley

Reuters via CNBC ^ | October 22, 2009 | Reuters

[CutePuppy]

The Federal Reserve may end up taking no losses on the emergency programs it put in place to fight the crisis, New York Fed president William Dudley said on Thursday, a view that was shared by Fed vice chairman Donald Kohn.

"The Fed may ultimately avoid any losses on any of the programs," Dudley said in brief opening remarks before moderating a panel at the Boston Fed's annual conference. Dudley said the emergency facilities were shrinking naturally.

"Things have gone pretty well," he said of the exit of some of the liquidity facilities.

Fed vice chair Donald Kohn mirrored that sentiment in the audience discussion that followed the panelists' presentations.

"If you look at the liquidity facilities... the 13(3) facilities are in the process of winding down without losses," he said, referring to the emergency facilities authorized under Section 13(3) of the Federal Reserve Act.

Kohn also said the Fed was unlikely to suffer losses when it begins to sell the mortgage-backed securities it has acquired as it battled the crisis.

Kohn argued that the "announcement effect" of a program is critical, due to the reassurance it can offer to the market. Dudley had earlier said that maintaining the Fed's credibility was viewed as critical while the programs were being designed.

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[CutePuppy]

That's pretty positive, though it doesn't speak for Treasury Dept. and agencies like FDIC which needs a temporary loan, but will recover the money in time through higher fees from member banks.

[GeronL]

printing presses must be burning overtime

[wolfcreek]

How can someone with the ability to print their own money, ever lose?

[milwguy]

The Fed will unload all their toxic MBS’s to Fannie, Freddie, and FHA. Those three are being used as the toxic waste site where all the bodies will be buried.

[Freddd]

So, a timed economic Jihad and who profitted?? The same who created the problem.

Kinda like the taliban. They cause the problem, and when resistance is weak they claim to fix the problem.

[CutePuppy]

They may try, but now, that Fannie and Freddie are officially government-owned entities, it will be pretty transparent, and will not be as easy to bury as when they were “implicitly guaranteed”.

That’s probably just one of the reasons for Obama’s economic team attempting to fold most of Fannie and Freddie assets into a new “public-private” entity - MCGE, to allow the same kind of shenanigans that FNM and FRE had been involved in.

[momincombatboots]

Does that mean we finally got an audit? Or are we just taking their word?

[CutePuppy]

You don’t need to “audit” Fed to get this particular information - they have been getting a pretty high rate of interest from the emergency loans, and many of these have been either fully or partially paid already. Some of these loans would have been paid up in full by now if it were not for their and FDIC demand of higher capital reserves at the banks until it’s deemed to be “safe”.

For example, few people know that they earned money from Lehman, not lost.

[momincombatboots]

You are not saying the Fed is a profit thing! Please don’t burst my bubble with truth. :)

[April Lexington]

Wishin’ don’t make it so....