Posted on 03/28/2008 10:24:39 AM PDT by BGHater
The Federal Reserve announced Friday it will auction another $100 billion in April to cash-strapped banks as it continues to combat the effects of a credit crisis.
The central bank said it would make $50 billion available at each of two auctions, on April 7 and April 21.
Through the end of March, the Fed has provided $260 billion in short-term loans to commercial banks through the innovative auction process. It also has employed Depression-era provisions to provide money to investment banks.
All the moves have been designed to cope with a serious financial crisis that has roiled U.S. and global markets and caused the near-collapse of Bear Stearns Cos., the nation's fifth largest investment bank.
The Fed has been holding auctions every two seeks since December to provide short-term loans to commercial banks. It started with auctions of $20 billion, then pushed the level to $30 billion, and in early March raised the auction amount to $50 billion as the credit shortage grew more severe.
In announcing the move to $50 billion last month, the Fed said it would continue the auctions for at least the next six months, unless credit conditions show they are no longer needed.
The auctions are just one of a series of unorthodox steps the Fed has taken to battle the current crisis. The biggest of those moves was an announcement that it was allowing investment banks to borrow directly from the Fed. Previously, only commercial banks, which face tighter regulations, had that privilege.
The Fed also said it would make available $30 billion in financing to support the sale of troubled Bear Stearns to JP Morgan Chase & Co., hoping to prevent a bankruptcy that could have rocked Wall Street.
The Fed's auctions have drawn criticism from some that the central bank, and ultimately U.S. taxpayers, could be financing a bailout for big Wall Street firms that had engaged in risky lending practices.
Fed Chairman Ben Bernanke will fact questions about the Fed's recent moves when he testifies on Wednesday before the congressional Joint Economic Committee.
The central bank fianances nothing. It merely prints money and lends it out at interest rates that are attractive to the borrowers. The additional money sloshing around the economy gives the borrower a call on goods and services. We finance that by foregoing those goods and services. The central bank loses nothing except the patience of the People, not that that weighs in the balance of these things.
I’m closing my Washington Mutual account today.
A private entity is buying American real estate ... buying America.
None Dare Call It Conspiracy.
Not being a financial type.... What are the ramifications of this?
I think somebody is running scared. Or maybe they’re just trying to get all the good stuff out of the house before it burns down.
Not wow yet.
Home Depot down 27 % last quarter, Lowes down 34 %, some of the so called ‘immune’ big box discounters are starting to hurt. Target hurting? Yes.
I wouldnt be suprised if the FED started loaning directly to a big retail outfit before this is all said and done. They’re playing a perception game while they load the banks up with cash to shovel out the windows.
That commercial paper is endless, there’s not enough money to buy it all up. Something has to happen to orphan it for awhile, but that means some crashes. Crash(s) are going to have to do what the market cant right now, which is rip the value out of the CDO’s and foreably de-couple the entire credit structure from Mortgage-backed securities for a time being. There’s no price stability in the housing market, and those MBS’ are underpinning so much junk that the junk clogging everything up cant wash out of the system, it’s still teethered to a hard asset. Real Estate and all the real money that chased the derivities spun off the credit expansion that, at the citizen level, expanded housing equity at the same pace it expanded other forms of credit. The debt totals remain on everyones bottom line, but the mechanisms lending institutions have to accumulate capital to lend are falling apart. The Housing Bust is taking down the credit system.
This is crazy. SIV’s were financial HIV.
Then it’s WOW.
You're right, the Federal Reserve does not create money and give it to Wall Street. Just like they don't create money and give it to the Treasury.
You said so
I said what?
Was the Fed lying or were you lying?
About what?
I read a report that the banks are buying the Euro with that money. LOL
LOL!
Which is rising because the FED tanked the dollar by issuing more of them and handing them out to their cronies on Wall Street (appologies to Todd who says it just isn't so).
Nope, not inflationary. They’re simply replacing money (debt) that was destroyed by the mortgage debacle.
If anything, they’re trying but failing to get ahead of deflation.
In case you were too stupid to understand the Fed's actions (again), I saw this in the article.
The Fed has been holding auctions every two seeks since December to provide short-term loans to commercial banks.
Now if you think a loan is the same thing as "giving money to Wall Street" then you're probably too stupid to comment on these threads on FR.
;OD
Eeegads...wait til Glenn Beck gets a load of this! He’s apt to stroke out.
What a mess.
Somebody failed Logic 101.
You are so right.
The problem is that although it is insured, you gotta wait for the check. I’ve heard it can take up to ten years.
But it is not about the money that much. I just want to separate myself from that company.
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