Fed's Loan Rescue Sparks Big Stock Rally

uscitizen

uscitizen

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Fed's Loan Rescue Sparks Big Stock Rally

Tuesday March 11, 7:56 PM EDT

WASHINGTON (AP) — Staring at spreading financial dangers, the Federal Reserve announced a rescue package Tuesday that would pour as much as $200 billion into banks and investment houses and allow them to put up risky home-loan packages as collateral.
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The Federal Reserve announced it would allow squeezed financial institutions — including big investment houses and banks — to borrow up to $200 billion in super-safe Treasury securities by using some of their more risky investments as collateral.

The Fed announced the creation of a new Term Securities Lending Facility (TSLF) to provide financial institutions with 28-day loans of Treasury securities, rather than overnight loans. The institutions would pledge other securities — including federal agency residential-mortgage-backed securities, such as those of mortgage giants Fannie Mae and Freddie Mac — as collateral for the loans. Fed officials said it's the first time they'll be accepting mortgage-backed securities through this type of lending program.

http://finance.myway.com/jsp/nw/nwdt_rt.jsp?section=news&feed=ap&src=601&news_id=ap-d8vbhpog0&date=20080311
 
Govt supporting bad businesses, buy selling debt bonds secured by the worst risks the badly run businesses have. What do you think ?
 
uscitizen said:
Govt supporting bad businesses, buy selling debt bonds secured by the worst risks the badly run businesses have. What do you think ?
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Isn't it necessary to avoid a complete collapse though? I mean, I know there are a few muscular capitalists in various forums who are banging on about the need for the business cycle to clean out the weak and all the rest of that Spencerian bullshit but they seem to forget that (a) real people lose their jobs and (b) the weak system of capitalism needs to be propped up by the state or it will enter one too many collapses and simply die. Capitalism is only still crawling along because of constant state support. The state supports it because it can't envisage the total collapse.
 
FDIC is to cover collapses. If someone wanted to go outside the FDIC insured areas that is their risk.

We can spend hundreds of billions to bail out badly ran businesses, but nothing to keep the poor guy down the street from losing his home because his 2 yr old has cancer and no insurance...


Yeah a great country.
 
cypress and usged don't have a remedial economics class between them.
It will cause inflation, it will hurt the dollar. But you can only let the banking system sink so low before risking a much worse situation.
 
Topspin said:
cypress and usged don't have a remedial economics class between them.
It will cause inflation, it will hurt the dollar. But you can only let the banking system sink so low before risking a much worse situation.
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this is blasphemy to free marketeers and Ronbots.

The government shouldn't be intervening. Let the markets work it out.
 
yep Free markets without government intervention. remember ?

Yep prop up the mortgage market so more people can buy overpriced and oversized houses they cannot afford. Just stretch the pain out.
 
Diuretic said:
This is a good thing no?
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Like most moves by the government, it depends....

The Fed can pump an eternal supply of money into the system (which they seem intent on doing) and it can still potentially do no good.

The problem that got us into this mess was banks and other lenders making loans to those that would not have qualified prior to 1992. Now the lenders have increased their credit lending standards (many back to those pre-1992 levels).

Thus, the only way this helps the situation is if the banks turn around and loan that money back out to the public (individual and corp).

My guess is the Fed drops the Fed Funds rate by another 50-75bps next week and thus steepens the yield curve further. That will in turn make the numbers more favorable to the banks to start generating loans.

The problem with all of this is it is an extremely inflationary move to pump more and more currency into the system and to be lowering rates.

This will continue to pressure commodity prices higher... oil, grain, etc...

This recession will likely be over by the end of the summer at the latest. Then the Fed must address inflation (the sooner they get going the better) by raising rates.
 
Diuretic said:
Isn't it necessary to avoid a complete collapse though? I mean, I know there are a few muscular capitalists in various forums who are banging on about the need for the business cycle to clean out the weak and all the rest of that Spencerian bullshit but they seem to forget that (a) real people lose their jobs and (b) the weak system of capitalism needs to be propped up by the state or it will enter one too many collapses and simply die. Capitalism is only still crawling along because of constant state support. The state supports it because it can't envisage the total collapse.
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Yes, people lose jobs if you let the market correct this situation on its own. But we cannot keep enacting policies that are done to protect jobs in the short term. Because I guarantee you if they let inflation get out of control.... far more will lose their jobs because of that.... AND it will crush the economy.
 
uscitizen said:
I agree with you SF right up till the point of saying this will be over by the end of summer. no way.
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It will not be over in the sense that all foreclosures will have taken place, but it will be over in the sense that we will have crossed the last of the big rate resets in May. By the end of summer we should be able to tell how many of them will fall into foreclosure.

Add in the fact that the equity and bond markets have already priced in the bulk of the negative news and you should see a rebound in the equity market sometime in the early part of summer.

Keep in mind, this is how things currently look... obviously things can change. If the Fed lets inflation get out of control... it could easily extend the problems for the next several years.
 
uscitizen said:
Inflation is going to get out of control it is inevitable now.
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It is not inevitable. That is simply fear mongering at this point to say something like that. Well, either fear mongering or a lack of understanding of what can be done to alter the course inflation is currently on.
 
The USA and it's dollar is no longer strong enough to stave off what is coming.

We are now in the grips of a world economy. Something many sought but will regret.
 
You need to figure in other factors SF, like my post on the defecit widening. do I need to find one on the falling dollar too ? I liked how the finiancial types empahsised that todays stock rally was the biggest in years. Heck we almost gained back 2 weeks of losses ? will it last though is the question.
 
what's inevitable is usmoron continuing to show us he can barely read moveon.org and hasn't a clue on his own. He does have mullette cypress chearing him on. Once he opens his mouth a little more he's likely to prove equally ignorant.:clink:
 
uscitizen said:
The USA and it's dollar is no longer strong enough to stave off what is coming.

We are now in the grips of a world economy. Something many sought but will regret.
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and what do you think would increase the value of the dollar and lower inflationary pressures?

1) reduce fiat money in the system

2) raise short term interest rates

3) eliminate subsidies on ethanol and the use of grain to produce ethanol.
 
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