prudentinvestor

The Fed is Running Out of Options

Good analysis, but you state the solution as: "Then, it should require its wards on Wall Street to buy loans from regional banks and bundle those loans into bonds for sale to fixed-income investors."

The problem is that any rational fixed-income investor will demand an interest rate high enough to cover (a) the expected high inflation + (b) the tax he pays on interest + (c) the probability of default.

If the government insured these bonds, (c) goes away.

If the government makes them tax-free income, (b) goes away.

This leaves (a), and with the current expectation of high inflation from the massive stimuli, (a) is probably 6-8%.

If such bonds are taxable, then (b) will add another 3-4%.

If such bonds are not government-guaranteed, (c) will add another 6-8%.

Thus, a normal market with rational fixed-investors is unlikely to purchase such bonds at a rate that a home buyer can afford.