Posted on 10/31/2011 8:43:45 AM PDT by packback
t is the never ending bubble. Federal Reserve official, Daniel Tarullo, stated in a speech late last week that the Federal Reserve should begin to purchase long term mortgage backed securities as a way of driving down the interest rates, which are already at historic lows, even further. He said that it would have the added benefit of...
(Excerpt) Read more at milwaukeestory.com ...
liquidity trap
Why would any governmental, quasi-governmental, or private organization buy that junk? Let them default or not, but let it happen now so the economy can recover. Spending our children’s money to delay the inevitable helps no one today and harms our children forever.
We're doomed.
A new QE by a different name.
It's government guaranteed.
Spending our children’s money
The Federal Reserve doesn't spend our children's money, the Treasury does.
Actually they are not. Mortgage backed securities are . . . backed by mortgage contracts, nothing more.
The Federal Reserve doesn't spend our children's money, the Treasury does.
Whoever is spending that money for this Fed gimmick, and I'd say it includes the Fed if the reckless spending is initiated on their recommendation, they are wasting money and accomplishing nothing positive. Congress is disgustingly irresponsible for allowing it to happen as are all other individuals and organizations involved with this massive waste of taxpayer dollars.
Actually they are not. Mortgage backed securities are . . . backed by mortgage contracts, nothing more.
Actually, Fannie and Freddie MBS are government guaranteed.
Congress is disgustingly irresponsible for allowing it to happen as are all other individuals and organizations involved with this massive waste of taxpayer dollars.
The Federal Reserve doesn't spend taxpayer dollars.
Private buyers will only step in if they're assured that they'll be bailed out by gov't should disaster ensue. Gov't will buy that junk to protect the well-connected debt-holders who give lavishly to politicians.
Why would any governmental, quasi-governmental, or private organization buy that junk?
The entire fractional banking system of western civilization is completely over leveraged. In order for it to be maintained as a working system they must get the underlying assets that have been leveraged (10 to 1, 30 to 1, 100 to 1, etc.) to return to the market value of the original loans. Ponzi schemes require constant growth and cannot survive economic contraction / deflation. That is why they have allowed the banks to maintain the illusion that the real estate is worth more than its current market value. If they actually marked it to the real value and took a haircut, the over leveraged multipliers would crush the banks and put them under. The FED has to get the real estate market back up and running to escape this problem which is why they are obsessed about generating buyers to take the real estate off the banks hands and rework the loans. Unfortunately for them, this giant ponzi scheme is on it’s last leg and no one beats the demand for exponential growth of the base to continue this type of system once you are way up the curve.
I wonder if special politicans will have their mortgages ignored. Will certain favored classes get a free pass?
The "junk" that the Fed would buy is Fannie and Freddie MBS. Guaranteed by the Treasury. Trading over par. Kinda the opposite of junk.
Since "junk" has a more or less established definition in the financial world, I'll agree with your semantic point. But, since the Treasury "guarantee" amounts to nothing more than a promise to connive with the Fed to create oceans of new debt that the tapped-out taxpayers are obliged to pick up, I'll still say it's junk in any real world sense. At this point it's a game of musical chairs just waiting for the music to stop.
Sounds like you and K. Denninger are in deep agreement.
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