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Thread: US Fed now run by Dr. Strangelove ?

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    Default US Fed now run by Dr. Strangelove ?

    this is getting downright scary ...



    (snip)"The same Wall Street rabble that brought you a raging inflation, a trashed US Dollar, a now collapsing debt and credit Bubble of historic proportion, the demise of Joe Ultra Light Six Pack and a massive maladjusted economy, now are trial ballooning a new neutron bomb to finish the job. This one is right out of Dr. Strangelove.


    With worsening strains in credit markets threatening to deepen and prolong an incipient recession, analysts are speculating that the Federal Reserve may be forced to consider more innovative responses — perhaps buying mortgage-backed securities directly. “As credit stresses intensify, the possibility of unconventional policy options by the Fed has gained considerable interest, said Michael Feroli of J.P. Morgan Chase. He said two options are garnering particular attention on Wall Street: direct Fed lending to financial institutions other than banks and direct Fed purchases of debt of Fannie Mae and Freddie Mac or mortgage-backed securities guaranteed by the two shareholder-owned, government-sponsored entities.

    I would expect the impact of this on the targeted securities to last about just long enough for the trading desks to mobilize the proceeds into more crack up boom (CUB) trades. This would be mostly be a test of who has the quickest electronic order system than about any special talents. You, me and Aunt Millie can only watch in horror from the ledge of room 1408 if this plays out. This would be like showing slasher movies to four year olds. Indeed the latest reaction of the markets just to this trail balloon is stunning: more parabolic price action in CUBs, and more USD trashing. The obvious question is would this latest scheme just be another dud stupid dog trick, or does Dr. Strangelove really have his finger on the nuclear trigger? The second question: do they sterilize any outright mortgage purchases by selling Treasuries? Even if the later I would still characterize this as a 1945 style nuclear explosion."(snip)


    The bottom line behind all of this is that, thanks to a new policy change, the US Fed is now 'trading' US Treasuries for the toxic mortgage paper held by troubled investment banks via a fresh round of loans. The Fed is also letting rumors hit the street that these loans may turn into outright purchases / trades. This of course improves the banks' credit situation and lowers the banks' default risk, but it also implements a de-facto responsibility on the US taxpayer to make good on the toxic mortgage paper bought by the US Fed !!!!!! Obviously, the US stock and commodities markets went crazy today as a result !

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    Default Re: US Fed now run by Dr. Strangelove ?

    This morning the Fed announced yet another new program to provide liquidity to failing markets. The program is called the Term Securities Lending Facility (TSLF).
    "This is not a liquidity problem but a solvency problem. For all practical purposes the game is up but the Fed does not know it yet."

    http://globaleconomicanalysis.blogsp...all-stops.html
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Default Re: US Fed now run by Dr. Strangelove ?

    indeed Mish is right that solvency (or lack thereof) is the root of the problem. However, all of these new measures by the US Fed, which essentially exchange 'toxic waste' held by banks for US Treasury Bonds at face value, are creating a potential taxpayer bailout of the banking system that could very well bankrupt the country.

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    Veteran Member StuartL's Avatar
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    Default Re: US Fed now run by Dr. Strangelove ?

    Amazing stuff. It is the kind of thing that actually, I'd rather not read. Even for a doom and gloomer like me, sometimes ignorance is bliss!!

    Perhaps they are worried that massive debt, inflation, recession, pensions or medical care won't ruin the country as quickly as they need, so need to speed up the process...

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    Default Re: US Fed now run by Dr. Strangelove ?

    Wow, these are bold statements made and I know I do stand to lose a great deal if these incidents come to fruition... and the seed has been watered!
    Oh Canada, we stand on cars and freeze...

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    Default Re: US Fed now run by Dr. Strangelove ?

    Nearly half a trillion dollars put into the system so far and it's still going down...

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    Default Re: US Fed now run by Dr. Strangelove ?

    FREE MONEY!

    Reuters is reporting JPMorgan, NY Fed to provide Bear Stearns financing.
    http://technocrat.net/d/2008/3/14/37653
    http://globaleconomicanalysis.blogsp...ailed-out.html

    What's interesting this time are actual statements from the company in question speculating on whether or not said bailouts will work.
    Somehow this pool was 92.6% rated AAA in spite of the fact that full doc was provided on only 11% of the loans. This folks is another fine example of how out of whack the rating agencies are.
    And if Bear Stearns was loaded up with this garbage, they deserve to go under.
    http://globaleconomicanalysis.blogsp...r-stearns.html
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Default Re: US Fed now run by Dr. Strangelove ?

    The other day Bush said Bernake was doing a good job handling the economy. If he’s using the same yardstick to measure Bernake’s success as he did for FEMA director Mike Brown, then we’re all fucked.

    I'm surprised that I haven't heard how the current recession is the fault of Bill Clinton, but I'm sure it's coming as soon as they admit we are in one.

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    Default Re: US Fed now run by Dr. Strangelove ?

    They have thrown half a trillion dollars at this problem so far and all they have done is help their buddies out. But their works on the American people (and the rest of the world) is still going to drag them down to the depths like being tied to a boat anchor.

    I don't know anyone who trusts a mortgage lender these days.

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    Default Re: US Fed now run by Dr. Strangelove ?

    ^^^ agreed, with the Bear Stearns bailout now crossing lines into uncharted territory i.e. a de-facto taxpayer funded bailout of a speculator / hedge fund enabler / mergers and acquisitions enabler 'non-bank' who has extremely few 'average Americans' as clients. This is so outrageous I started a new thread about it.

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    Default Re: US Fed now run by Dr. Strangelove ?

    What amazes me more, not that these things are happening, but that no-one seems to comment or care. It is as if the entire world of investigative journalism has crawled away and died.

    And not only does the general public not know, those that do don't seem to care. This is, after all, a global problem but there is no global concern - or at least there doesn't seem to be.

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    Default Re: US Fed now run by Dr. Strangelove ?

    Quote Originally Posted by StuartL View Post
    It is as if the entire world of investigative journalism has crawled away and died.
    There's a lot of press about some American politician's sex life though.

    Fed is cutting rates and exposing itself to more default risk by lending to more firms...
    http://globaleconomicanalysis.blogsp...-meltdown.html

    Below is a list of primary dealers who will be able to borrow directly from the Fed's new program announced Sunday
    http://www.marketwatch.com/news/stor...-55F05D859B76}
    Last edited by person; 03-17-2008 at 04:12 AM. Reason: Fixed a link
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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