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The Fed considers a new "sterilized" bond purchase program, still aimed at boosting the economy,...

The Fed considers a new "sterilized" bond purchase program, still aimed at boosting the economy, but also designed to calm inflation fears. With this plan, the Fed would still conjure up dollars to buy long-term bonds, but would then engage in a "reverse repo," borrowing back the money for short periods. And all it took was one serious down day in stocks.
Comments (54)
  • Lint
    , contributor
    Comments (391) | Send Message
     
    "Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates"

     

    say what??
    7 Mar 2012, 11:27 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9973) | Send Message
     
    Say what???? Who is going to save us mere mortals from the Fed ... that's what us consumers want to know.
    7 Mar 2012, 11:41 PM Reply Like
  • Rummeljordan
    , contributor
    Comments (477) | Send Message
     
    I wonder if they sit longer to figure out the new names of asset purchase programs rather than figure out what the implications will be?
    7 Mar 2012, 11:30 AM Reply Like
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    I guarantee you that more thought goes into the names of the programs than the implications of the programs.
    7 Mar 2012, 11:34 AM Reply Like
  • Ricardo Espinosa
    , contributor
    Comments (459) | Send Message
     
    We need more QE, yesterday scared the living beejezus out of all of us, I tought the world was going to end, what did they mean the market was down? S&P to 3,000! That´s the best solution, everyone agrees!
    7 Mar 2012, 11:31 AM Reply Like
  • HarryWanger
    , contributor
    Comments (188) | Send Message
     
    Something has to be "aimed at stimulating the economy" since nothing seems to have worked to this point. Who knows, maybe several trillion more by the time QE108 comes around and we might just have an UE rate under 8%.
    7 Mar 2012, 11:36 AM Reply Like
  • arfman
    , contributor
    Comments (6) | Send Message
     
    What do you mean "nothing seems to have worked to this point"? Employment is improving, the economy is growing albeit slowly, and risk tolerance is rising. I shudder to think what would have happened had the Fed simply stood still.
    7 Mar 2012, 01:49 PM Reply Like
  • dixie
    , contributor
    Comments (276) | Send Message
     
    Certainly, if we are to be "stuck", it should be with a "sterilized" knife.
    7 Mar 2012, 11:38 AM Reply Like
  • RS055
    , contributor
    Comments (3164) | Send Message
     
    Treasuries owned by the Fed are effectively neutralized. The interest paid by the Treasury Dept to the Fed are promptly returned to the Treasury Dept.
    So the folks who are worried about the govts. interest costs spiralling out of control are perhaps missing this point. The strategy seems to be the Fed will own increasingly larger amounts of Treasuries ( they currently own about 10% of ll Treasuries outstanding). If they wind up owning a large fraction of the longer dated Treasuries - then problem solved. Lets not forget they can keep the short end at zero as long as they please.
    Well of course there is that pesky inflation issue - but nothing that some clever accounting cannot mask.
    7 Mar 2012, 11:44 AM Reply Like
  • credit_man
    , contributor
    Comments (173) | Send Message
     
    wrong(T purchases by the FED are not neutral for the system)
    FED is trying to avoid 2 things by withdrawing liquidity at time of T purchase(sterilization)
    1-inflation creation through money supply increase
    2-unwind risk.when will they sell back those T?
    7 Mar 2012, 02:25 PM Reply Like
  • css1971
    , contributor
    Comments (870) | Send Message
     
    Sell their treasuries?
    Never happen.
    8 Mar 2012, 03:57 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    "Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates."

     

    So you take money out of your right pocket, give it to Joe, and then ask Joe to lend it back to you and put it into your left pocket.

     

    I don't even know what the hell this program does based upon the description above so I can't conjure up an appropriate criticism :)

     

    I think they are trying to keep long bond rates down with this program - more financial repression for savers.
    7 Mar 2012, 12:01 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3459) | Send Message
     
    The s.a. summary is misleading. If you follow the link, it says that they're not actually doing any of this nor is there any new program starting. The fed is just announcing that IF they do more QE, they'll do it this way. But no new QE is planned at this time.
    7 Mar 2012, 11:17 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    SandDiego,

     

    Trial balloons like this don't happen by accident - someone at the FED made sure this story got onto the WSJ.

     

    The quote I have above is the second paragraph of the story.

     

    Can't read the full article because I am not a subscriber.
    8 Mar 2012, 01:38 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    http://seekingalpha.co...
    8 Mar 2012, 01:59 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    jhooper

     

    Thanks for the excellent link.
    8 Mar 2012, 02:18 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    I'm just here to help and pick fights.
    8 Mar 2012, 02:22 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    I'd forgotten about this, but the story above fits with the excerpt below. The plan is to continue flattening the yield curve (remember this doesn't come without cost somewhere else in the economy).

     

    November 2 Bernanke press conference.

     

    "Third quarter GDP had just been released a few days before, and the growth rate was 2.5%, almost twice as fast as expected. A reporter asked Bernanke if he was pleased, to which he replied yes, of course he was. But he added that while 2.5% was much better than expected, it is still far short of the growth needed to rapidly reduce the unemployment rate. GDP growth should be 4-4.5%, he said."

     

    As long as it isn’t, BB will continue to work to flatten the curve. He want's people taking risk, so he is going to try and get people to take interest rate risk. What's interesting is that if he succeeds, then a growing economy will lead to a situation where the demand for capital oustrips the supply and interest rates will go up. So the Fed will be sitting with a bunch of long dated maturities in a rising rate environment.
    8 Mar 2012, 04:19 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    jhooper,

     

    One thing that has truly puzzled me about this policy is that from the standpoint of a bank, why would I lend out money on a 30 year horizon fixed rate at today's low interest rates secured by real estate?

     

    Wouldn't the likelihood of interest rising in the year's ahead discourage the bank from wanting to lend? Are they not subject to the value of the loan declining as interest rates rise?

     

    I know I must be missing something because it seems to me that the low rates are going to be an impediment to the risk side of the credit markets for as long as the FED tries to flatten the yield curve. It seems safer for the banks to borrow from the FED, lever up and just buy the 30 year bond and skip the risk for anything that isn't FHA insured.

     

    What do you think?
    8 Mar 2012, 04:30 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    Well here is what I understand the big boys do. Some of the community banks with lots of noninterest DDAs won't do this, but then they don't grow either, so what the big boys do is really the market mover.

     

    They will issue a 30 yr fixed rate, but then swap that for a variable rate (the entire FHLB balance sheet is swapped). This of course costs them something. If rates are at what would be considered a bottom, then they will loose on this for the first few years, but what they would be banking on is that if rates rise they will win for the majority of the loan from the swap. Basically what this strategy does is to compress margin, so the only way to make up for the compression is volume (as if volume were possible now). Add to this, is that you need the underlying collateral to keep its value or go up in value, which is a big worry right now. To be safe, if you think RE could go down another 20%, then you want a down payment of 40% not 20%.

     

    So here is what the bank is facing. A 30 yr mgt might only last 7 years, because people move or accelerate their payments. If the swap is underwater 5 yrs, then the bank looses big time. If the collateral looses value, and defaults, then you not only have to write off the loan, but also the value of the swap. Would you want to take these kinds of risk with your capital ratios just barely above water, or would you rather tread water by making some spread from your 25 bps at the Fed which is a 0% risk weight for capital as opposed to a 50% or 100% risk weight for a mgt?

     

    So what they can also do is go out and buy a 20 yr agency at 3.50%with a one year call, and when we get to this time next year, the bond is called because rates are the same or even lower, and the bank made a 3.25 spread with a lot lower risk than a strip mall or a house that might loose collateral value between now and this time next year.

     

    The problem here is the Fed is the guy that drives the back of the fire truck. He can do everything he needs to do, but if the guys in the front (pres and congress) drive the truck over the cliff, the guy at the back is going with them. BB doesn't have lots of tools, he has just one. He can subsidize financial assets, by buying assets off of bank balance sheets at subsidized prices he gives them first crack at brand new CB notes. The first guy to get a brand new Federal Reserve note will benefit the most from it, because the inflation hasn't set in yet.

     

    This reduces the banks need to pay up for deposits or other funding, and so people take CB notes they would normally give to banks who used to pay a decent yield and they go looking for the yield elsewhere. This is how BB props up asset values for equities and other financial assets. He depresses the deposit financial assets people used to hold, and thereby inflates or arrests the deflation of other financial assets by getting people to take the risk of buying them. You create more buyers than before for a limited number of assets, thus supply and demand, and the price goes up or fails to fall.

     

    The problem is what really needs to prop up asset values for equities is innovation and greater productivity, not manipulated markets made possible by a CBs backing of force from the gov. So if real productivity doesn't follow, what you could get is a transfer of the housing bubble to a bubble in equities. If you buy in at the peak, then the bubble collapses and you sell, you were just taxed to make the bubble profitable for the early buyers. This can go on as long as the nation has wealth that can be transferred to prop up the financial markets. If you can time these actions, buy selling the peaks and buying the dips, you can have that wealth transferred your way.

     

    Make no mistake though, for the time being BB is committed to taxing the general populace to transfer that wealth to the financial markets to keep those prices up. So what is normally good news for equities will be good news, and what is bad news for equities will be good news because this will pull the CB back into action to tranfer more wealth to the financial markets. This is after all what it was designed to do, and if the actions aren't too large, the CB can keep this malaise going on for years. It would take major political change or an armed revolt to stop it. I don't think that will happen.
    8 Mar 2012, 05:09 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3459) | Send Message
     
    That would be more convincing, Wisdumb, if Bernanke hadn't just gotten done telling Congress that they're not planning more easing at this time.
    8 Mar 2012, 08:31 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    sandiego,

     

    "at this time" by definition expires the moment it is uttered especially as it applies to the political realm.
    8 Mar 2012, 09:21 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3459) | Send Message
     
    It was clear from context that he meant "unless the economy falters and risk of double dip becomes substantial". Bernanke has said repeatedly that an anemic recovery is not reason to do another round of QE. If the recovery isn't self-sustaining, then the Fed probably would do another round of QE but so far that doesn't seem to be the case. The U.S. recovery is continuing despite global slowdown.
    9 Mar 2012, 09:33 AM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    Don't forget that OT is still going on till June. OT is already sterilization. This current suggestion, is really a suggestion of more OT. QE 1 and 2 aren't over. Just because the buying ends doesn't mean the QE is over, it just means the growth in the size of the balance sheet has stopped. OT isn't growing the balance sheet, it is just restructuring it.

     

    This article makes sense because it falls in line with what seems to be BBs thinking of getting people to take risk by pushing them out on the yield curve. If people succumb to this, they need to recognize what they are doing. This is not to say that taking that risk is bad, but just to say that you need to know the risks the Fed is inducing you into and that you might need to look for signals to get out to avoid having those risks catch up with you.
    9 Mar 2012, 10:01 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3459) | Send Message
     
    As you say, however, Twist is different from QE. It's swapping bonds for bonds. It should flatten the yield curve, although that's not actually happening. Instead the yield curve is disappearing as it falls through the bottom of the graph because the y-axis stops at zero.

     

    I've thought from the get-go that the real goal of Twist was to help the housing mkt. I also think that's going beyond the Fed's mandate and that's why they're not talking much about what it's intended to accomplish. Helping the housing market should help employment and I suppose that's the rationale but that seems (do I dare say this?) a bit too twisted.
    9 Mar 2012, 11:30 AM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    "beyond the Fed's mandate"

     

    The mandate is vauge, thus it is open to interpretation. If you think about it, if a CB could maintain stable prices and full employment, you really wouldn't need the rest of the gov. Such a goal would require a CB to control all aspects of an economy, which would require controlling all aspects of human life. Its typical legislative cowardice to hand off such responsibility to a regulatory agency, but such wide responsibility can give the regulator lots of excuses and rationals as to why they do what they do.

     

    If you look at language coming from the various governors and BB, they are talking about what they are doing. They see housing as necessary for the recovery, and the recovery as necessary for employment. Thus, they see trying to subsidize housing as part of their mandate because they think this will affect employment.

     

    Their problem is that they don't have any capital that they can add to the economy that would actually change interest rates and thus subsidize housing without adding costs to the economy somewhere else. This is part of the mistaken conception people have about CBs. The only capital the CBs have available to them is the capital that currently exists in the economy. Thus to help one sector of the economy, they have to hurt another. Basically you hurt the very people you are trying to subsidize. All you've done is take water from one end of the bath tub and poured it in the other end. There is no new net change, thus housing doesn't recover because even though you have lowered the interest rate to buy the house you have hurt the credit quality of those for whom you just lowered the ineterest rate.

     

    CBs don't really affect interest rates by affecting the supply and demand intersection of capital which would require adding brand new capital, they transfer purchasing power from those that created it to those that did not, so those that did not can purchase financial assets. Such interventions damage an economy, and to the level the CB is damaging the economy is the level to which it can slow it down and thus diminish the demand for capital which results in lower rates. Combine this with fiscal policy that is hostile to production, and the damage to an economy can be imense. This will result in low demand for capital, and a flight to safety ensues. Such policies can result in low interest rates for very long periods of time because the economic opportunities for capital have been severly restricted.
    9 Mar 2012, 11:50 AM Reply Like
  • inthemoney
    , contributor
    Comments (981) | Send Message
     
    Perhaps they should buy student loans this time around . With 0% interest rate student loans are at 7% and non-dischargable. I wish I could issue those myself, they are a much better deal than mortgages.
    7 Mar 2012, 12:01 PM Reply Like
  • Marketspath
    , contributor
    Comments (7) | Send Message
     
    This is our conclusion from our February newsletter-IWM topped that day at 83.31 and hit a low of 78.43 yesterday. The newsletter was saying to short rallies.-click on the link below to have the full report sent to your in-box. There Is still some timely information inside the report.
    02/17/12: Many money managers are telling as many as they can to get 100% invested in the stock market right here and now. They may be right in the long term, but our intermediate term indicators are saying that you may want to move to cash or at the least lighten up your portfolio if long. If you are aggressive, you can look to short this market, but understand tops are a process.

     

    Some large traders are making big bets on some type of volatility shock to hit the markets through the vix call options for March/April expiration. With the vix in a bullish wolfewave as well as a bullish rising wedge, they may very well be correct. If we see a volatility shock hit, it will have the indexes heading lower. IWM is trading within a very large bearish wolfewave, which also supports lower levels ahead.

     

    The commercial traders are as net short as we have seen in over 10 years. With the large institutions net short and looking for a volatility shock to hit, if you are just a long side trader, I think you will get a much better entry in the coming months. If you are a short or bearish trader, we should see a very nasty nail biting drop hit in the coming weeks. Good luck trading.

     

    http://bit.ly/xNTGES
    7 Mar 2012, 12:18 PM Reply Like
  • htmortimer
    , contributor
    Comments (120) | Send Message
     
    I think that's what you do when nobody wants to buy your debt.
    7 Mar 2012, 01:11 PM Reply Like
  • john12345
    , contributor
    Comments (331) | Send Message
     
    Wonderful. Well, I can't figure out where the pea is hidden but why does Bernanke have to do these transactions which smell just like Wall Street and mortgages?
    7 Mar 2012, 01:21 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3459) | Send Message
     
    "why does Bernanke have to do these transactions"

     

    He's not. They're not actually doing this, just planning ahead to how they would do another QE if there ever is another QE but at this point none is planned.
    7 Mar 2012, 11:19 PM Reply Like
  • RS055
    , contributor
    Comments (3164) | Send Message
     
    I believe the thinking is to a) Do reverse-reps to suck some of the excess reserves out of the banks, b) Buy an equivalent amount of longer dated Treasuries. So to the great - unwashed congress it looks like a "sterilized" operation.
    However, the reverse repos will effectively have no impact on anything ( since the excess reserves are basicaly inert assets). However the buying of long dated Treasuries will certainly be a fresh round of monetization ( AKA QE). So - there - pretty clever .
    7 Mar 2012, 01:34 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    So basically they take long bonds off the bank's balance sheets and replace them with short bonds, with the difference being the short bonds aren't a "sell" transaction to the bank, just a temporary "lending" transaction. So, in theory, the repo could be collapsed and the result would be the Fed had basically bought both short and long, but just not at the same time, which is probably what they have really been wanting to do all along. They just don't want to admit it. It looks too much like "monetizing" the debt.
    7 Mar 2012, 05:08 PM Reply Like
  • RS055
    , contributor
    Comments (3164) | Send Message
     
    No - they replace a portion of the Reserves on the asset side of the banks' balance sheets with short term Treasuries. As far as the banks are concerned this is a non event. As far as the Fed is concerned this results in a balance sheet shrinkage - less in assets ( T-bills), less in Reserve liabilities.
    So - now having done the above- which had zero impact on anything - the Fed prints up fresh cash and buys 10 year Treasuries ( say) - from pension funds. This will leave the pension funds with too much cash. So they will go out and buy Corporate bonds, equities whatever. This will have an upwards impact on risk markets.
    7 Mar 2012, 09:59 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    How could they buy from pension funds? Wouldn't the pension funds need to be primary dealers?
    8 Mar 2012, 06:27 AM Reply Like
  • mikeurl
    , contributor
    Comments (444) | Send Message
     
    Either this is unofficial or it is very deeply buried on the Fed's website. I can't find anything on this other than the WSJ article.
    7 Mar 2012, 01:43 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (550) | Send Message
     
    It wouldn't be on the Fed's website. Fed brass (I'm assuming Bernanke, but it could be Yellen or Dudley) often put this information out first through favored journalists, of which Hilsenrath is the top of the heap.

     

    When he leads a story, "Federal Reserve officials are considering a new type of bond-buying program ... ," it's likely coming right from the horse's mouth.
    7 Mar 2012, 02:22 PM Reply Like
  • mikeurl
    , contributor
    Comments (444) | Send Message
     
    Thanks.

     

    There is something vaguely distasteful about a public official speaking off the record to a reporter who writes for a site with a paywall.

     

    So now if I want to know what Bernanke is saying I have to pay the WSJ. That seems absurd because I already pay Bernanke's salary. Why do I have to pay twice to hear his thoughts on monetary policy. This should be accessible free through the Fed website.
    8 Mar 2012, 11:38 AM Reply Like
  • credit_man
    , contributor
    Comments (173) | Send Message
     
    FED is moving towards what ECB is doing:buying bonds without increasing money markets liquidity.
    must be a sign of something?
    7 Mar 2012, 02:18 PM Reply Like
  • deerduke
    , contributor
    Comment (1) | Send Message
     
    'Sounds like another TARP.
    7 Mar 2012, 02:23 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    Not really. TARP injected actual capital, whereas this would be buying security assets from the dealers and replacing it with Fed Res notes (cash).
    7 Mar 2012, 05:09 PM Reply Like
  • SA reader
    , contributor
    Comments (176) | Send Message
     
    Why don't we call the Fed what it is. Financial Branch of Obama's Re-Election Campaign 2012.
    7 Mar 2012, 02:41 PM Reply Like
  • thechaser
    , contributor
    Comments (595) | Send Message
     
    mikeurl; jon hilsenrath is the dc guy to cover the Fed, so most consider him their unofficial leak-to guy for various stealth releases and like anybody with a relationship, hey you play the tune your steady eddy wants to hear; frankly i am perplexed why they'd use him in this manner; yesterday was well orchestrated and managed by the PPT to let a little air out and the greek thing is pre-wired; maybe the Fed WILL NOT DO ANYTHING NEXT TUESDAY... now where would that leave things
    7 Mar 2012, 03:26 PM Reply Like
  • RS055
    , contributor
    Comments (3164) | Send Message
     
    Seems a small 5% ish correction would give the Fed the necessary cover to do its "sterilized" operation ( Please dont call it QE!! Wink wink). Morover, the way this latest QE is structured - it could be very large verging on 1 Trillion - since that is aout the extent of the excess reserves in the banking system.
    At some point an SPR release would also be salubrious - to counteract the effects of such monetary largess and whack oil down a couple of pegs.
    The alternative to all this would be a new administration that is very hostile to the Fed - so call it merely self-preservation!.
    7 Mar 2012, 03:31 PM Reply Like
  • Inzaghi009
    , contributor
    Comments (29) | Send Message
     
    So they'll lend the money out to banks and then borrow them back for higher interest rates effectively running the ponzi bank scheme.

     

    Banks have access to easy money and stay propped up, ie. if CDS gets activated. And the Fed pays them interest for doing it. Something like that?

     

    Moral Hazard???
    7 Mar 2012, 04:00 PM Reply Like
  • Dirtydozen011
    , contributor
    Comments (63) | Send Message
     
    Are they for real ?
    When does it stop - oil at 130 ? at 150 ? at 200 ?
    7 Mar 2012, 04:07 PM Reply Like
  • bearfund
    , contributor
    Comments (1534) | Send Message
     
    "When does it stop - oil at 130 ? at 150 ? at 200 ?"

     

    No.
    7 Mar 2012, 11:44 PM Reply Like
  • Mark Humphrey
    , contributor
    Comments (792) | Send Message
     
    So the Fed steps in and buys long bonds, via recurring programs, to hold long term rates down. In doing so, they encourage banks to buy longer maturity treasuries that beat 25 bsis points on excess reserves. The banks buy treasuries, the seller of the treasuries deposits the sales proceeds in his bank account, and presto! Money supply grows $1 for every T bond purchased by commerical banks.

     

    Thus we get growing money supply with no more shock n awe QEs, even if bank lenders and commercial borrowers remain reluctant. Even if the Fed absorbs $2 in excess reserves thru repos, compared with every $1 of bonds purchased by commercial banks, the money supply still grows by the amount banks buy bonds.

     

    Nice monetary growth brings not-so-nice inflation, especially after about 4 years of rampant money supply growth. So bond buyers head for the hills and the Fed's on a treadmill that's turning faster and faster. The faster they buy bonds with money conjured from nothing, the more real goods are allocated away from productive toward unproductive activities.

     

    This will save us all. I shudder to think where we might be without the Fed to rescue us.
    7 Mar 2012, 04:18 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    A central bank can't do anything to help any particular group without hurting another group to make that help possible.
    7 Mar 2012, 05:12 PM Reply Like
  • mikeurl
    , contributor
    Comments (444) | Send Message
     
    Yes, if they telegraph their move then the banks should front run them and drive up the price of longer dated treasuries.

     

    The Fed is probably pretty desperate to keep the 10year below 2%. From a technical standpoint the 10 year is very overextended. A 25% move down in price doesn't look at all unjustified just with a quick look at a long term chart. That would immediately drive mortgage rates up back over 4% and slam a lid on any movement of the giant backlog of foreclosed homes.

     

    Personally I think the fed should do this sterilization but instead of long treasuries they should buy MBS. That would actually help reduce the spread between the 10 year treasury and the 30 yr mortgage while also taking some balance sheet pressure off Fannie, Freddie and the FHA.
    8 Mar 2012, 10:53 AM Reply Like
  • torahislife
    , contributor
    Comments (400) | Send Message
     
    Fed's Master Plan:
    1. Panic, borrow to pave more road and kick can.
    2. Panic, borrow to pave more road and kick can. Go to 1.
    7 Mar 2012, 05:00 PM Reply Like
  • john12345
    , contributor
    Comments (331) | Send Message
     
    Although the Fed's activities seem highly sophisticated and confuse mortals, they are still just a lending institution. No more, no less. All of these Fed transactions center around borrowing or paying off debt instruments in a manner to move interest rates or feed the beast (US govt financial needs).

     

    Eventually, all these transactions have to be unwound.

     

    Here's how it works:
    Them that has, gets;
    Ain't no free lunch.
    7 Mar 2012, 05:24 PM Reply Like
  • mweaver
    , contributor
    Comments (201) | Send Message
     
    1938; henry morganthau, fdr's treasury secretary;
    "mr president, we've done everything we can and
    nothing is working". real estate in the tank; stock market
    still floundering; underemployment still high.
    sound familiar. credit cycles are slow to unwind.
    8 Mar 2012, 06:00 AM Reply Like
  • Lint
    , contributor
    Comments (391) | Send Message
     
    "Federal Reserve officials are considering a new type of bond-buying program designed to subdue worries about future inflation if they decide to take new steps to boost the economy in the months ahead."

     

    Translation - heat up the economy just in time for November...
    8 Mar 2012, 02:04 PM Reply Like
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