The Fed produces more than $81bn in revenue annually, the cost of doing this is minuscule. The biggest reason why they did this was because the market had become so tight as to completely deviate from the Fed Funds target rate, 5.25%. Overnight the market implied rate was ~6%. Had this been allowed to continue it would have caused massive disruptions to the economy and runs on the banks. It was purposefully done to keep the system running and avoid 1929. If you want to see that scenario reply, then do so within your own life. Take all of the money you have and will earn and put it under your bed. You cannot spend one penny, then tell me how that works.Originally posted by: elmro
If the government bought these MBS for MORE and will sell them for LESS that means that the government will have spent money on this "stabiliziation", AKA a BAILOUT. Wow I love how my tax dollars are going straight into the pockets of financial institutions.
My biggest issue with this is not that they put liquidity into the market through Repo funds, but that they didn't do it with Treasuries, as they almost always do. They used MBS securities, which I do not like since they were influencing the system a bit more than they should have.