Posted on 12/16/2010 1:30:14 PM PST by speciallybland
Rep. Ron Paul, (R-Texas), who will head a subcommittee overseeing the Federal Reserve in the new Congress, called the central bank a “cartel” and said it had “monopoly control” over the US dollar. “I think we should start ending the Fed by allowing competition. I don’t like the idea that they have monopoly control. It’s a cartel: They get to print the money,” said Paul, who wrote a book called End the Fed.
Paul said that he wanted to “legalize competition,” so that Americans can use gold and silver as legal tender.
(Excerpt) Read more at cnbc.com ...
Well actually I believe the FED didn’t buy the toxic assets. They made loans against them. The banks retained the toxic assets and used them as collateral to obtain the loans.
The Deloitte Touche audits are external. The reports and financial statements are posted on the web.>>>>>>>>
If Ron Paul doesn’t trust that audit or think it is not thorough enough, then I’m the same. Trust but verify.
Well actually I believe the FED didn’t buy the toxic assets. They made loans against them. The banks retained the toxic assets and used them as collateral to obtain the loans.>>>>>>>>
They are exotic swaps from here to eternity so in effect are purchases. If the swaps bomb out tomorrow it is the Fed’s problem
What did the Fed loan them according to you? Some very nice Treasury bills and the Fed got crap in return. Swaps like at a swap meet.
1) The fed didn’t loan them face value.
2) Not positive, but I believe they loaned them 80% of market value. In other words, the bank could have sold those loans on the market for 125% of what they got from the FED. Obviously the banks don’t believe those loans are as toxic as described. The market is scared of them and pricing them low. The banks not so much.
3) Collateral doesn’t absolve the bank from paying the loan. If the FED did have to seize the assets and sell them, the bank would still owe the difference between what the collateral sold for and the balance on the loan.
A simple repo isn't very exotic.
And they've already been repaid.
This is my understanding of the situation. Written August 2010
Creature from jeklyll island was one of the best books I have ever read.
Paper money and paper checks are so passé. We have moved onto plastic money (credit cards) and electronic blips on hard drives keeping score
I'll bet that book is selling many more copies than it did 7 years ago.
The Fed's liquidity injection was made by issuing credit to banks and simultaneously buying back troubled (i.e., subprime) banking sector assets.
AFAIK, they bought Fannie and Freddie securities, not subprime mortgages.
Three billion dollars a year in interest payments is a large portion of the Fed's annual operating profits.
Huh? They made $45 billion in net profits last year.
Economically, the Fed is losing a large portion of its operating profits to these payments.
Large portion? LOL!
Knowing that the Fed now holds the most toxic of the subprime assets the banking system could create during the roaring 2000s should leave us with some concern.
Knowing that the author doesn't understand what assets are held by the Fed leaves me with some concern.
In any event, it appears to me that the so-called toxic loans are really backed by real estate and while real estate values have dropped some the appraisals weren't fraudulent.
The fed loaned such a small amount against the real value of the loans, that I don't really see this as a problem.
I'm convinced the FED is not our problem. The Congress and it's insane appetite for spending and borrowing is the problem. We have to elect better people to congress. This past election was a step in the right direction.
Those are our problems not the FED, not mortgages, not even the CRA.
AFAIK, they bought Fannie and Freddie securities, not subprime mortgages.>>>>>>>>
Fed is holding a trillion plus in toxic MBS from Fanny/Freddy. I thought they were holding (swaps) hundreds of billions of the same but from major banks such as Citi. Are you saying those banks took back these toxic MBS?
The Fed does hold ~75 billion in toxic MBS from AIG and Bear Stearns under the Maiden Lane facility... might be two Maiden Lanes
Fannie and Freddie MBS are trading above par.
I thought they were holding (swaps) hundreds of billions of the same but from major banks such as Citi.
If you're talking about the securities the Fed accepted as collateral in exchange for Treasuries at the height of the crisis, all those swaps have been unwound.
Are you saying those banks took back these toxic MBS?
Yes.
The Fed does hold ~75 billion in toxic MBS from AIG and Bear Stearns under the Maiden Lane facility... might be two Maiden Lanes
There are 3 Maiden Lanes. They hold about $66 billion, a bit less than the claim at your link that they hold half of their balance sheet in subprime assets. If the entire Maiden Lane portfolio is subprime, that'd be less than 3%.
Then the Fed can gradually unload them and if they crap out again the USG or Fed can bail out the buyers
The banksters got off the hook by being given (lent) hundreds of billions (trillions?) in free zero interest funds by their Federal Reserve partners in crime. They mostly bought TBills and got an idiot-proof 2-3%. Did not lend it out like Obama with his phony outrage demanded.
Savers got ripped off by low interest rates while your broke banksters got rich again. The Fed's number one priority is servicing its bankster buddies
I can’t take this clown seriously anymore after his vote in support of homosexualizing the military. He is loathsome.
The lowest they've been able to borrow from the Fed Discount Window is 0.75%.
They mostly bought TBills and got an idiot-proof 2-3%.
T-Bills mature in less than 12 months. Currently yielding less than 0.3%. That trade would be the opposite of idiot proof.
Treasuries longer than 12 months
If you went out 10 years, you'd get 3.3%.
You don't think it's a good idea to finance a 10 year bond with an overnight loan, do you?
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