That's nice but how is that "lowering the cost for banks to offload crap"?
Not if the underlying assets are financed by helicopter ben; no loss there
The hedge fund still owns the CDO, the hedge fund still has the loss, not the taxpayer.
Gee, i dunno. let's see... I am a banker with some crap loans that I can't sell. well, shucks, lemme just put them on the fed for 30 days and kick the can down the road. let the fed take and finance what the market won't.
And in 30 days or 60 days or 90 days, after paying the Fed interest on my borrowings, I get the crap loan back. I'm still losing money. Try again?
The fed has boosted the value of the underlying asset by being a buyer (financier) for crap that leveraged holders are choking on. It doesn’t get any simpler than that. I’d be happy to spell out how this action amounts to a bailout of CFC and the lenders to it, but if you won’t accept the top premise, then it’s pointless. have a great day!