Posted on 03/10/2008 6:15:48 PM PDT by shrinkermd
With worsening strains in credit markets threatening to deepen and prolong an incipient recession, analysts are speculating that the Federal Reserve may be forced to consider more innovative responses -- perhaps buying mortgage-backed securities directly.
"As credit stresses intensify, the possibility of unconventional policy options by the Fed has gained considerable interest
...Since 1932, the Fed has had the authority to lend, against collateral, to individuals, partnerships or corporations other than banks in "unusual and exigent circumstances," subject to the vote of five members of the Board of Governors. (The board has seven seats, but two are currently vacant.) This power has never been used.
Mr. Feroli noted that Congress in 1966 gave the Fed temporary authority, made permanent in 1979, to purchase obligations of government-sponsored enterprises, such as Fannie Mae and Freddie Mac.
So far, the Fed hasn't purchased GSE obligations except in its short-term repurchase operations. When the federal budget was in surplus, the Fed considered outright purchases of GSE obligations, but judged against such a move as it would reinforce the perception of an implicit government guarantee.
Last week, the Fed said it would lend banks $100 billion starting this week in 28-day loans through its new Term Auction Facility, at which banks can post a wide variety of collateral, including mortgages, corporate loans and other items that have become harder to sell in the open market. And it said it would make money-market loans of as much as $100 billion to its network of 20 bond dealers for 28 days, double the usual maximum term, and structure them to encourage dealers to submit mortgage-backed securities guaranteed by Fannie and Freddie Mac.
Sen. Christopher Dodd (D., Conn.), chairman of the Senate Banking Committee, has suggested creating a new government corporation that could buy mortgage-backed securities
(Excerpt) Read more at online.wsj.com ...
Volcker style 1982 medicine would kill the patient today
I have no solutions only condemnations of the love of debt of all Americans from the Fed on down to Appalachia. Live today and put off how to pay for it tomorrow
Or as Wimpy the hamburger lover in Popeye cartoons used to say—
“I’ll gladly pay you Tuesday for a hamburger today”
Which claims?
and got you to admit banks create money out of thin air.
I've never denied that the banking system creates money out of thin air. Now all you need to do is show how DBEI does it. Start from scratch, with the $200 billion in borrowed T Bills used as reserves.
My work is done here.
Or you could run away. LOL!
dollarbull, Good ol’ Baghdad Todd has never had a point, and if you catch him at one and prove him wrong he shifts his ground like Hamlet’s Ghost. One thing he never does his take ground, stand on it and hold it. Never. LOL!
True but they just don't get to keep the money and add it to the list of things they own
Plus as you say these days are unique where the Fed is putting billions of 28 day t-bills? (which will be renewed from here to eternity) into bank vaults to bolster their capital positions. The language used is they are lending this Fed money and accepting POS CMOs and other crud for collateral
My point is that your point is wrong.
Good summary
In the old days these eco-traitors would have been tarred and feathers by now.
They are economy killers
Though I will admit Wall St and the Fed have done more damage all in all
Have you ever considered that the largest players and free trade evangelists have been gold and commodity hedged for years and relish this US dollar crash?
Trus the market has been over priced for five years this down turn is a good thing it will make people think before they invest next time.
LOL
!
I agree, you’re right. Rough water, dead ahead.
You are completely correct as far as Bear Stearns...... But not in the general way that banks are allowed to “create money”
Not us. We learned that it is money created out of thin air, that inflating the currency does not pick our pockets, and that the right to have the Federal reserve make you whole for your losses is a fundamental right of freedom. Furthermore, we are not even making new money, but just money that was always there (except that they lost it, and so the Fed is just giving them back what they lost).
What. Me worrry? It's all good. Nothing to see here. Just move along. Oh yeah. BSC was doing just fine, no problems at all, until like Wile. E. Cayote they found themselves 5,000 feet up with an anvil over their heads.
It's all good.
The FED loans a $ and it creates $5-$10 in credit in the banking system. Ok so the banks "owe" back the $1 at 2% interest or whatever the fed funds rate is today. What about the market rate interst on the $5-10? Do they owe all of that back to the Fed too? Oh I know, it is in demand deposits on which they have to pay interest, so they lend it at prime + (7-8%) and have to pay the depositor (1-1.5%). Such a hard life, and to get in you have to put all that capital at risk, expect that if you lose your capital, well the Federal Reserve just cooks up a bailout.
What part of this do you think we don't understand. All the blood sweat and tears that go into trying to make a profit off of someone else's money, worry that you might lose it! Hah!
You see, the Fed is no different than the lost and found at summer camp. Lose $100B. No problem. Go to the Fed and they find it for you.
At this point I would settle for a bit of humility from these stumblebums. An apology and an admission that they were not really as clever as they thought they were.
Oh yeah, and they need to give the Ferrari back. They can drive an SUV like the folks they look down on.
I understand 70% of what you are saying. Do you know a short book that explains all this hocus pocus. You have to be a moron to own a bank and have it fail, the Fed is always ready to bail
Good one. This entire fiasco is such a “heads I (banking system) win tails you (public) loose” clusterf* that I can’t believe people put up with it.
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