Posted on 03/30/2020 10:27:17 AM PDT by Oldeconomybuyer
The Federal Reserve has offered more than $3 trillion in loans and asset purchases in recent weeks to stop the U.S. financial system from seizing up, but it has not yet directly helped large swaths of the real economy: companies, municipalities and other borrowers with less than perfect credit.
That is partly because America’s central bank is not allowed to take much credit risk itself, and loans to lower-rated borrowers have a higher chance of losses. The risk is exacerbated by the spread of coronavirus which have brought economic activity to a screeching halt.
To alleviate that constraint, the U.S. Treasury - whose job it is to manage the government’s finances and help the Fed keep the economy steady - has taken on some of the risk that Fed loans will not be paid back.
It has contributed about $50 billion from a pool of money called the Exchange Stabilization Fund. That money will be used to absorb losses from Fed loans that go bad. Assuming only a fraction of loans will default, the Treasury contribution has allowed the Fed to lend much more without taking on additional risk.
On Friday, the Treasury got about $450 billion more from Congress as part of a $2.2 trillion U.S. stimulus package, greatly increasing its ability to support the economy. Before the bill passed, the stabilization fund had about $93 billion in assets as of the end of February.
Treasury Secretary Steven Mnuchin told Fox News on Sunday he believed the additional funds could help the Fed and Treasury provide about $4 trillion in loans.
But investors and economists said even this additional money may be insufficient, and Congress will likely need to pony up trillions of dollars more before the Fed and Treasury can make a significant dent in the real economy.
(Excerpt) Read more at reuters.com ...
I really don’t know how this can be sustained.
I hear $2 Trillion, but also hear $6 Trillion as the actual cost. And this amount was predicated on a return to business relatively soon, as in mid-April. Now it’s end of April.. maybe. So how can this be sustained?
Is the $2.2 trillion U.S. stimulus package bill available online?
“because America’s central bank is not allowed to take much credit risk itself”
I don’t know where they found that “rule”. I suspect that they made it up because it sounds good.
the markets are rallying - so i think we should cruise.
“So do we continue on this road until China refuses to let the US borrow any more money?”
China could do that only if they decided to cut off their own access to the American consumer market. Buying bonds is the flip side of that trade.
At some point, the system will break down.
That’s $1,000 each, about what we’re getting.
The other $1.85 trillion is for graft.
Rooters and Asspress suck more than usual, if that’s possible.
Translation: The democrats want way more money. And they want more to funnel to all there progressive causes. And they want more to funnel through their shell companies and then back to themselves.
Keynesianism died with The Carter Administration.
People are still arguing over the grave marker these 40 years later.
> Rep Massey(?) made a great point....for the $2 TRILLION we’re spending we could have sent a check for 13,300 to the 150,000,000 workers in the country. That’d be a better help than the $1,200/$3,400 people are getting.
Although some of the money is actually in the form of loans which the government anticipate will be paid back... (yes? dunno for sure...)
Reuters and AP really have upped their game in the leftist BS
effort.
OK. Following that reason, the “stimulus” should be 50 trillion dollars, in one year. That should really “stimulate” the economy!
Obvious bull$h!t. What it will do is deflate the value of the currency leading to runaway inflation and poverty.
Pray tell, oh Holy Reuters Gurus of the economy — if more is better, then there is no limit to how much more. Where should it stop?
Like the minimum mandated hourly rate (”minimum wage”). If $15 is great, then 30 should be better. In fact, let’s go to 60. NO. I say 600. But why stop there? Make it 5,000 per hour and those McDonald’s burger flippers will all buy 148 room mansions with pools and tennis courts.
(Except that a 149 room mansion will cost $680.0 million and the burgers $5,000.)
Still don’t understand why Trump signed this monstrosity.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.