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Fed Reserve buys stock in emergency?

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LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
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.
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.

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.
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Being able to meet obligations is not the problem here, people wanting to take risk is the problem, since nobody wants to be holding the hot potato. Junk isn't relative, it's a set standard, anything below BBB is junk and it's not based upon the asking price. The asking price is based upon the status of the bond and the underlying pool along with market perceived risk.
Of course being able to meet obligations is the problem. You think the banks want to be holding cash just for shits and giggles. Junk is any bond where there is a high risk that it isn't going to be paid back. I know that the bonds are junk, the fed knows it, and the bank knows it. Just because some rating agencies refuses to acknowledge it doesn't make the bond any less junk.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: smack Down
Being able to meet obligations is not the problem here, people wanting to take risk is the problem, since nobody wants to be holding the hot potato. Junk isn't relative, it's a set standard, anything below BBB is junk and it's not based upon the asking price. The asking price is based upon the status of the bond and the underlying pool along with market perceived risk.
Of course being able to meet obligations is the problem. You think the banks want to be holding cash just for shits and giggles. Junk is any bond where there is a high risk that it isn't going to be paid back. I know that the bonds are junk, the fed knows it, and the bank knows it. Just because some rating agencies refuses to acknowledge it doesn't make the bond any less junk.
It's not the banks that need the liquidity, it the rest of the market that does. Additionally, there is plenty of liquidity out there, it's just people don't want to move it and they were going to charge more than the Fed was comfortable with.

As far as pricing risk and setting junk status, nobody knows where this is going to shake out, not the bondholders, not the RA, not the banks, and not the Fed. It could be nothing, it could a lot more than that, only time will tell. However, the collateral, as it stands now, is far from "junk" in that it's still paying at a decent rate and the performance hasn't deteriorated greatly. I would agree that within the next 6 months many of these will junk, but that's not now.

We can argue semantics all night.
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Originally posted by: LegendKiller
Originally posted by: smack Down
Being able to meet obligations is not the problem here, people wanting to take risk is the problem, since nobody wants to be holding the hot potato. Junk isn't relative, it's a set standard, anything below BBB is junk and it's not based upon the asking price. The asking price is based upon the status of the bond and the underlying pool along with market perceived risk.
Of course being able to meet obligations is the problem. You think the banks want to be holding cash just for shits and giggles. Junk is any bond where there is a high risk that it isn't going to be paid back. I know that the bonds are junk, the fed knows it, and the bank knows it. Just because some rating agencies refuses to acknowledge it doesn't make the bond any less junk.
It's not the banks that need the liquidity, it the rest of the market that does. Additionally, there is plenty of liquidity out there, it's just people don't want to move it and they were going to charge more than the Fed was comfortable with.

As far as pricing risk and setting junk status, nobody knows where this is going to shake out, not the bondholders, not the RA, not the banks, and not the Fed. It could be nothing, it could a lot more than that, only time will tell. However, the collateral, as it stands now, is far from "junk" in that it's still paying at a decent rate and the performance hasn't deteriorated greatly. I would agree that within the next 6 months many of these will junk, but that's not now.

We can argue semantics all night.
Right the problem isn't liquidity (ie people, banks, hedge funds, whatever can liquidate their bonds for a fair price.) It is capitalization that fair price means they then have to liquidate additional assets to meet margin calls or other obligations and they don't have the assets to do that. That is why the fed is overpaying for junk.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Being able to meet obligations is not the problem here, people wanting to take risk is the problem, since nobody wants to be holding the hot potato. Junk isn't relative, it's a set standard, anything below BBB is junk and it's not based upon the asking price. The asking price is based upon the status of the bond and the underlying pool along with market perceived risk.
Of course being able to meet obligations is the problem. You think the banks want to be holding cash just for shits and giggles. Junk is any bond where there is a high risk that it isn't going to be paid back. I know that the bonds are junk, the fed knows it, and the bank knows it. Just because some rating agencies refuses to acknowledge it doesn't make the bond any less junk.
It's not the banks that need the liquidity, it the rest of the market that does. Additionally, there is plenty of liquidity out there, it's just people don't want to move it and they were going to charge more than the Fed was comfortable with.

As far as pricing risk and setting junk status, nobody knows where this is going to shake out, not the bondholders, not the RA, not the banks, and not the Fed. It could be nothing, it could a lot more than that, only time will tell. However, the collateral, as it stands now, is far from "junk" in that it's still paying at a decent rate and the performance hasn't deteriorated greatly. I would agree that within the next 6 months many of these will junk, but that's not now.

We can argue semantics all night.
Right the problem isn't liquidity (ie people, banks, hedge funds, whatever can liquidate their bonds for a fair price.) It is capitalization that fair price means they then have to liquidate additional assets to meet margin calls or other obligations and they don't have the assets to do that. That is why the fed is overpaying for junk.
Show me that it's junk. I honestly do not know but I am not the one making the claim.
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Originally posted by: LegendKiller
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Being able to meet obligations is not the problem here, people wanting to take risk is the problem, since nobody wants to be holding the hot potato. Junk isn't relative, it's a set standard, anything below BBB is junk and it's not based upon the asking price. The asking price is based upon the status of the bond and the underlying pool along with market perceived risk.
Of course being able to meet obligations is the problem. You think the banks want to be holding cash just for shits and giggles. Junk is any bond where there is a high risk that it isn't going to be paid back. I know that the bonds are junk, the fed knows it, and the bank knows it. Just because some rating agencies refuses to acknowledge it doesn't make the bond any less junk.
It's not the banks that need the liquidity, it the rest of the market that does. Additionally, there is plenty of liquidity out there, it's just people don't want to move it and they were going to charge more than the Fed was comfortable with.

As far as pricing risk and setting junk status, nobody knows where this is going to shake out, not the bondholders, not the RA, not the banks, and not the Fed. It could be nothing, it could a lot more than that, only time will tell. However, the collateral, as it stands now, is far from "junk" in that it's still paying at a decent rate and the performance hasn't deteriorated greatly. I would agree that within the next 6 months many of these will junk, but that's not now.

We can argue semantics all night.
Right the problem isn't liquidity (ie people, banks, hedge funds, whatever can liquidate their bonds for a fair price.) It is capitalization that fair price means they then have to liquidate additional assets to meet margin calls or other obligations and they don't have the assets to do that. That is why the fed is overpaying for junk.
Show me that it's junk. I honestly do not know but I am not the one making the claim.
Showing that the bonds are junk to you is as futile as showing that the sky is blue to the blind.

The fact that no one but the fed is willing to buy the bonds is proof that it is junk.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Being able to meet obligations is not the problem here, people wanting to take risk is the problem, since nobody wants to be holding the hot potato. Junk isn't relative, it's a set standard, anything below BBB is junk and it's not based upon the asking price. The asking price is based upon the status of the bond and the underlying pool along with market perceived risk.
Of course being able to meet obligations is the problem. You think the banks want to be holding cash just for shits and giggles. Junk is any bond where there is a high risk that it isn't going to be paid back. I know that the bonds are junk, the fed knows it, and the bank knows it. Just because some rating agencies refuses to acknowledge it doesn't make the bond any less junk.
It's not the banks that need the liquidity, it the rest of the market that does. Additionally, there is plenty of liquidity out there, it's just people don't want to move it and they were going to charge more than the Fed was comfortable with.

As far as pricing risk and setting junk status, nobody knows where this is going to shake out, not the bondholders, not the RA, not the banks, and not the Fed. It could be nothing, it could a lot more than that, only time will tell. However, the collateral, as it stands now, is far from "junk" in that it's still paying at a decent rate and the performance hasn't deteriorated greatly. I would agree that within the next 6 months many of these will junk, but that's not now.

We can argue semantics all night.
Right the problem isn't liquidity (ie people, banks, hedge funds, whatever can liquidate their bonds for a fair price.) It is capitalization that fair price means they then have to liquidate additional assets to meet margin calls or other obligations and they don't have the assets to do that. That is why the fed is overpaying for junk.
Show me that it's junk. I honestly do not know but I am not the one making the claim.
Showing that the bonds are junk to you is as futile as showing that the sky is blue to the blind.

The fact that no one but the fed is willing to buy the bonds is proof that it is junk.
lol, so you have nothing to back it up. You don't know what they bought, you don't know what the pools were comprised of, you don't know one damn thing. You're making ASSumptions based upon limited knowledge of the situation. It must be easy, in your own little world, to draw conclusions like you have based upon circumstantial evidence.

It's not a matter of nobody wanting to buy the bonds. Heck, it's difficult to even place A-1/P-1 paper beyond 1-day at this point and many conduits on the market don't have *ANY* subprime mortgages in them. However, that hasn't stopped spreads from widening out to ridiculous levels for *all* conduits, even when they are backed by banks with LoCs that have massive deposits and marginal subprime exposure. That's because nobody knows how to price or purchase anything at this point. To automatically assume that people can differentiate is something you probably don't have the knowledge nor expertise to discuss.

You like to make your jr. detective seem pretty important, but in the end your black helicopter theory is nothing more than that, a theory. NOw if you want to provide proof as to the MBS purchased, then do so and provide your rationale for calling them junk even if they were AAA wrapped by somebody such as FGIC who has marginal subprime exposure.
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Originally posted by: LegendKiller
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Being able to meet obligations is not the problem here, people wanting to take risk is the problem, since nobody wants to be holding the hot potato. Junk isn't relative, it's a set standard, anything below BBB is junk and it's not based upon the asking price. The asking price is based upon the status of the bond and the underlying pool along with market perceived risk.
Of course being able to meet obligations is the problem. You think the banks want to be holding cash just for shits and giggles. Junk is any bond where there is a high risk that it isn't going to be paid back. I know that the bonds are junk, the fed knows it, and the bank knows it. Just because some rating agencies refuses to acknowledge it doesn't make the bond any less junk.
It's not the banks that need the liquidity, it the rest of the market that does. Additionally, there is plenty of liquidity out there, it's just people don't want to move it and they were going to charge more than the Fed was comfortable with.

As far as pricing risk and setting junk status, nobody knows where this is going to shake out, not the bondholders, not the RA, not the banks, and not the Fed. It could be nothing, it could a lot more than that, only time will tell. However, the collateral, as it stands now, is far from "junk" in that it's still paying at a decent rate and the performance hasn't deteriorated greatly. I would agree that within the next 6 months many of these will junk, but that's not now.

We can argue semantics all night.
Right the problem isn't liquidity (ie people, banks, hedge funds, whatever can liquidate their bonds for a fair price.) It is capitalization that fair price means they then have to liquidate additional assets to meet margin calls or other obligations and they don't have the assets to do that. That is why the fed is overpaying for junk.
Show me that it's junk. I honestly do not know but I am not the one making the claim.
Showing that the bonds are junk to you is as futile as showing that the sky is blue to the blind.

The fact that no one but the fed is willing to buy the bonds is proof that it is junk.
lol, so you have nothing to back it up. You don't know what they bought, you don't know what the pools were comprised of, you don't know one damn thing. You're making ASSumptions based upon limited knowledge of the situation. It must be easy, in your own little world, to draw conclusions like you have based upon circumstantial evidence.

It's not a matter of nobody wanting to buy the bonds. Heck, it's difficult to even place A-1/P-1 paper beyond 1-day at this point and many conduits on the market don't have *ANY* subprime mortgages in them. However, that hasn't stopped spreads from widening out to ridiculous levels for *all* conduits, even when they are backed by banks with LoCs that have massive deposits and marginal subprime exposure. That's because nobody knows how to price or purchase anything at this point. To automatically assume that people can differentiate is something you probably don't have the knowledge nor expertise to discuss.

You like to make your jr. detective seem pretty important, but in the end your black helicopter theory is nothing more than that, a theory. NOw if you want to provide proof as to the MBS purchased, then do so and provide your rationale for calling them junk even if they were AAA wrapped by somebody such as FGIC who has marginal subprime exposure.
You say not know as if it is a good sign. Sun shine is the best disinfectant. If they are not publicizing the type of bonds they purchased that is even more proof that they purchased junk. But hey cheer on as the fed devalues your dollars to bail out the rich. Of course why wouldn't you when you are one of them.

 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Originally posted by: LegendKiller
Originally posted by: smack Down
Being able to meet obligations is not the problem here, people wanting to take risk is the problem, since nobody wants to be holding the hot potato. Junk isn't relative, it's a set standard, anything below BBB is junk and it's not based upon the asking price. The asking price is based upon the status of the bond and the underlying pool along with market perceived risk.
Of course being able to meet obligations is the problem. You think the banks want to be holding cash just for shits and giggles. Junk is any bond where there is a high risk that it isn't going to be paid back. I know that the bonds are junk, the fed knows it, and the bank knows it. Just because some rating agencies refuses to acknowledge it doesn't make the bond any less junk.
It's not the banks that need the liquidity, it the rest of the market that does. Additionally, there is plenty of liquidity out there, it's just people don't want to move it and they were going to charge more than the Fed was comfortable with.

As far as pricing risk and setting junk status, nobody knows where this is going to shake out, not the bondholders, not the RA, not the banks, and not the Fed. It could be nothing, it could a lot more than that, only time will tell. However, the collateral, as it stands now, is far from "junk" in that it's still paying at a decent rate and the performance hasn't deteriorated greatly. I would agree that within the next 6 months many of these will junk, but that's not now.

We can argue semantics all night.
Right the problem isn't liquidity (ie people, banks, hedge funds, whatever can liquidate their bonds for a fair price.) It is capitalization that fair price means they then have to liquidate additional assets to meet margin calls or other obligations and they don't have the assets to do that. That is why the fed is overpaying for junk.
Show me that it's junk. I honestly do not know but I am not the one making the claim.
Showing that the bonds are junk to you is as futile as showing that the sky is blue to the blind.

The fact that no one but the fed is willing to buy the bonds is proof that it is junk.
lol, so you have nothing to back it up. You don't know what they bought, you don't know what the pools were comprised of, you don't know one damn thing. You're making ASSumptions based upon limited knowledge of the situation. It must be easy, in your own little world, to draw conclusions like you have based upon circumstantial evidence.

It's not a matter of nobody wanting to buy the bonds. Heck, it's difficult to even place A-1/P-1 paper beyond 1-day at this point and many conduits on the market don't have *ANY* subprime mortgages in them. However, that hasn't stopped spreads from widening out to ridiculous levels for *all* conduits, even when they are backed by banks with LoCs that have massive deposits and marginal subprime exposure. That's because nobody knows how to price or purchase anything at this point. To automatically assume that people can differentiate is something you probably don't have the knowledge nor expertise to discuss.

You like to make your jr. detective seem pretty important, but in the end your black helicopter theory is nothing more than that, a theory. NOw if you want to provide proof as to the MBS purchased, then do so and provide your rationale for calling them junk even if they were AAA wrapped by somebody such as FGIC who has marginal subprime exposure.
You say not know as if it is a good sign. Sun shine is the best disinfectant. If they are not publicizing the type of bonds they purchased that is even more proof that they purchased junk. But hey cheer on as the fed devalues your dollars to bail out the rich. Of course why wouldn't you when you are one of them.
Ahh yes, I am "rich" with my 160k in student loans. WTF ever dude. You're no better than good ole dave with your circumstantial evidence and claimancy to knowledge and oracular vision. When it comes down to providing proof you're both the same, you come off with some one-liner about rich and then leave it at that.

Releasing liquidity didn't do anything to devalue the dollar, as the money was already out there. I care quite a bit actually, if you spent more than 30s creating your post you'd see that I despise the way this thing is going. However, that'd be too simple.

I love how you're into the conspiracy theory. It's funny that you're so willing to jump to conclusions like that. That's akin to saying, just because the Fed doesn't release the names of every shareholder it's obviously controlled by the Jews. That's nothing more than a preconceived notion based upon the need of people to place motives upon a shadowy org. same thing you're doing.
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Originally posted by: LegendKiller


Ahh yes, I am "rich" with my 160k in student loans. WTF ever dude. You're no better than good ole dave with your circumstantial evidence and claimancy to knowledge and oracular vision. When it comes down to providing proof you're both the same, you come off with some one-liner about rich and then leave it at that.

Releasing liquidity didn't do anything to devalue the dollar, as the money was already out there. I care quite a bit actually, if you spent more than 30s creating your post you'd see that I despise the way this thing is going. However, that'd be too simple.

I love how you're into the conspiracy theory. It's funny that you're so willing to jump to conclusions like that. That's akin to saying, just because the Fed doesn't release the names of every shareholder it's obviously controlled by the Jews. That's nothing more than a preconceived notion based upon the need of people to place motives upon a shadowy org. same thing you're doing.
When did the free market become a conspiracy?? If the free market is unwilling to do a transaction that the fed is willing to do something else most be going on.

Edit: the money was not already out there. It came straight off the feds printing press. The fed traded X billion dollars for assets that the free market has determined are worth way less then X. So the fed created money out of thin air.
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
Originally posted by: smack Down
Originally posted by: LegendKiller


Ahh yes, I am "rich" with my 160k in student loans. WTF ever dude. You're no better than good ole dave with your circumstantial evidence and claimancy to knowledge and oracular vision. When it comes down to providing proof you're both the same, you come off with some one-liner about rich and then leave it at that.

Releasing liquidity didn't do anything to devalue the dollar, as the money was already out there. I care quite a bit actually, if you spent more than 30s creating your post you'd see that I despise the way this thing is going. However, that'd be too simple.

I love how you're into the conspiracy theory. It's funny that you're so willing to jump to conclusions like that. That's akin to saying, just because the Fed doesn't release the names of every shareholder it's obviously controlled by the Jews. That's nothing more than a preconceived notion based upon the need of people to place motives upon a shadowy org. same thing you're doing.
When did the free market become a conspiracy?? If the free market is unwilling to do a transaction that the fed is willing to do something else most be going on.

Edit: the money was not already out there. It came straight off the feds printing press. The fed traded X billion dollars for assets that the free market has determined are worth way less then X. So the fed created money out of thin air.
So why don't you educate us on how much the fed paid for those "junk" bonds, and how much those bond worth? If you don't know then STFU.

Fed does open market operations to control money supply (or in your word, create money out of thin air) all the time, so in you opinion, the fed shouldn't do anything with money supply at all? Then maybe you can again educate us with you infinite wisdom on what the heck the Fed is there for?

There is no such thing as free market, government intervene all the time. If there is a hint of inflation, government intervene. If the currency is about to devalue a lot and hurt businesses, government intervene. If the economy is not going, government intervene. So your are telling us that that right now subprime borrowing is impacting the entire nation, directly and indirectly, that Fed should just sit on it's @ss and do nothing?
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: smack Down
Originally posted by: LegendKiller


Ahh yes, I am "rich" with my 160k in student loans. WTF ever dude. You're no better than good ole dave with your circumstantial evidence and claimancy to knowledge and oracular vision. When it comes down to providing proof you're both the same, you come off with some one-liner about rich and then leave it at that.

Releasing liquidity didn't do anything to devalue the dollar, as the money was already out there. I care quite a bit actually, if you spent more than 30s creating your post you'd see that I despise the way this thing is going. However, that'd be too simple.

I love how you're into the conspiracy theory. It's funny that you're so willing to jump to conclusions like that. That's akin to saying, just because the Fed doesn't release the names of every shareholder it's obviously controlled by the Jews. That's nothing more than a preconceived notion based upon the need of people to place motives upon a shadowy org. same thing you're doing.
When did the free market become a conspiracy?? If the free market is unwilling to do a transaction that the fed is willing to do something else most be going on.

Edit: the money was not already out there. It came straight off the feds printing press. The fed traded X billion dollars for assets that the free market has determined are worth way less then X. So the fed created money out of thin air.
Those bonds were financed by something when they were on the banks balance sheet, were they not? Or did the bank just have them sitting there for no reason? Just magically appeared? Nah, they didn't have any cash to purchase them in the first place, that's why they were created by the tooth fairy.

Get a fricking clue, money wasn't "created" it was shifted around.
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
So why don't you educate us on how much the fed paid for those "junk" bonds, and how much those bond worth? If you don't know then STFU.
We don't know because the fed will not release such information. All we can know is that they paid more then the going rate for the bonds. How much more is anyone's guess. My only point is that you where wrong in claiming that the feds action was not a bailout. Who or is being bailed out or by how much isn't really know. All we know is so far the total is 200 billion dollars world wide.
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Originally posted by: LegendKiller
Originally posted by: smack Down
Originally posted by: LegendKiller


Ahh yes, I am "rich" with my 160k in student loans. WTF ever dude. You're no better than good ole dave with your circumstantial evidence and claimancy to knowledge and oracular vision. When it comes down to providing proof you're both the same, you come off with some one-liner about rich and then leave it at that.

Releasing liquidity didn't do anything to devalue the dollar, as the money was already out there. I care quite a bit actually, if you spent more than 30s creating your post you'd see that I despise the way this thing is going. However, that'd be too simple.

I love how you're into the conspiracy theory. It's funny that you're so willing to jump to conclusions like that. That's akin to saying, just because the Fed doesn't release the names of every shareholder it's obviously controlled by the Jews. That's nothing more than a preconceived notion based upon the need of people to place motives upon a shadowy org. same thing you're doing.
When did the free market become a conspiracy?? If the free market is unwilling to do a transaction that the fed is willing to do something else most be going on.

Edit: the money was not already out there. It came straight off the feds printing press. The fed traded X billion dollars for assets that the free market has determined are worth way less then X. So the fed created money out of thin air.
Those bonds were financed by something when they were on the banks balance sheet, were they not? Or did the bank just have them sitting there for no reason? Just magically appeared? Nah, they didn't have any cash to purchase them in the first place, that's why they were created by the tooth fairy.

Get a fricking clue, money wasn't "created" it was shifted around.
You're looking at the wrong balance sheet. You need to see where the fed got the money not where the banks got the money. That money is gone it went to the sellers of the homes.
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
Originally posted by: smack Down
So why don't you educate us on how much the fed paid for those "junk" bonds, and how much those bond worth? If you don't know then STFU.
We don't know because the fed will not release such information. All we can know is that they paid more then the going rate for the bonds. How much more is anyone's guess. My only point is that you where wrong in claiming that the feds action was not a bailout. Who or is being bailed out or by how much isn't really know. All we know is so far the total is 200 billion dollars world wide.
So you don't know how much the Fed paid for those MBS and you don't know who the money goes to, but you are sure this is a bailout. Well, hey, I guess I can claim to know anything too when I don't know diddly squad.

Do you even know the concept of Fed's open market operations and controlling the money supply? The 24 billion fed put into the market don't go to specific person/company, it is being injected into the market. When the Fed decided to tighten up the money supply, they will take the money out of the market. That's just how the market work, no one is getting bailed out other then the American people who will be able to enjoy a stable economy. (hopefully)
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Originally posted by: rchiu
Originally posted by: smack Down
So why don't you educate us on how much the fed paid for those "junk" bonds, and how much those bond worth? If you don't know then STFU.
We don't know because the fed will not release such information. All we can know is that they paid more then the going rate for the bonds. How much more is anyone's guess. My only point is that you where wrong in claiming that the feds action was not a bailout. Who or is being bailed out or by how much isn't really know. All we know is so far the total is 200 billion dollars world wide.
So you don't know how much the Fed paid for those MBS and you don't know who the money goes to, but you are sure this is a bailout. Well, hey, I guess I can claim to know anything too when I don't know diddly squad.

Do you even know the concept of Fed's open market operations and controlling the money supply? The 24 billion fed put into the market don't go to specific person/company, it is being injected into the market. When the Fed decided to tighten up the money supply, they will take the money out of the market. That's just how the market work, no one is getting bailed out other then the American people who will be able to enjoy a stable economy. (hopefully)
I don't see how your so confused. Lets make this simple do you agree that the fed purchased MBS? If yes do you agree that they paid above market rate? If no do you think banks sold their MBS for below market rate? So we know the fed overpaid for the MBS. That is a fact you can't dispute because it is a fact they might have overpaid by a billion dollars or 100 billion but that is only in degree of the bail out.

We gee, thanks fed for bailout the companies who made risky bets. I really should thank you for devalueing my dollars further. Maybe they should go to Vegas and buy some Slot machine back securities.
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
Originally posted by: smack Down
Originally posted by: rchiu
Originally posted by: smack Down
So why don't you educate us on how much the fed paid for those "junk" bonds, and how much those bond worth? If you don't know then STFU.
We don't know because the fed will not release such information. All we can know is that they paid more then the going rate for the bonds. How much more is anyone's guess. My only point is that you where wrong in claiming that the feds action was not a bailout. Who or is being bailed out or by how much isn't really know. All we know is so far the total is 200 billion dollars world wide.
So you don't know how much the Fed paid for those MBS and you don't know who the money goes to, but you are sure this is a bailout. Well, hey, I guess I can claim to know anything too when I don't know diddly squad.

Do you even know the concept of Fed's open market operations and controlling the money supply? The 24 billion fed put into the market don't go to specific person/company, it is being injected into the market. When the Fed decided to tighten up the money supply, they will take the money out of the market. That's just how the market work, no one is getting bailed out other then the American people who will be able to enjoy a stable economy. (hopefully)
I don't see how your so confused. Lets make this simple do you agree that the fed purchased MBS? If yes do you agree that they paid above market rate? If no do you think banks sold their MBS for below market rate? So we know the fed overpaid for the MBS. That is a fact you can't dispute because it is a fact they might have overpaid by a billion dollars or 100 billion but that is only in degree of the bail out.

We gee, thanks fed for bailout the companies who made risky bets. I really should thank you for devalueing my dollars further. Maybe they should go to Vegas and buy some Slot machine back securities.
Heh, does it ever occur to you that Fed paid fair market price for those MBS? why does it have to be either above or below market rate?

And you just said you don't know who got the money but somehow you know the company that made risky bet got bailed out by the fed money?

Please, before you go and flame Fed's action, go and educate yourself on how Fed and MBS work. I know plenty well how Fed and MBS work and you are the one who seems to be confused. Oh and if Fed actually do nothing, your dollar would devalue much more. The stock market has been hit hard by the subprime problem already, and banks that have nothing to do with subprime is being squeezed by the tightening credit and lack of liquidity in the market. In your simple mind, only banks made subprime loan is hit by this problem, but the fact is everything in the economy is gonna be hit hard if this goes out of control.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: smack Down
Originally posted by: rchiu
Originally posted by: smack Down
So why don't you educate us on how much the fed paid for those "junk" bonds, and how much those bond worth? If you don't know then STFU.
We don't know because the fed will not release such information. All we can know is that they paid more then the going rate for the bonds. How much more is anyone's guess. My only point is that you where wrong in claiming that the feds action was not a bailout. Who or is being bailed out or by how much isn't really know. All we know is so far the total is 200 billion dollars world wide.
So you don't know how much the Fed paid for those MBS and you don't know who the money goes to, but you are sure this is a bailout. Well, hey, I guess I can claim to know anything too when I don't know diddly squad.

Do you even know the concept of Fed's open market operations and controlling the money supply? The 24 billion fed put into the market don't go to specific person/company, it is being injected into the market. When the Fed decided to tighten up the money supply, they will take the money out of the market. That's just how the market work, no one is getting bailed out other then the American people who will be able to enjoy a stable economy. (hopefully)
I don't see how your so confused. Lets make this simple do you agree that the fed purchased MBS? If yes do you agree that they paid above market rate? If no do you think banks sold their MBS for below market rate? So we know the fed overpaid for the MBS. That is a fact you can't dispute because it is a fact they might have overpaid by a billion dollars or 100 billion but that is only in degree of the bail out.

We gee, thanks fed for bailout the companies who made risky bets. I really should thank you for devalueing my dollars further. Maybe they should go to Vegas and buy some Slot machine back securities.
Lets make something clear. There was no *sale* in traditional terms, in as much as a rental car is a "sale", then sure, a repo could be considered one. However, it states in clear terms that it will be repod at a certain day and time. Additionally, it's not that the banks couldn't sell these bonds, otherwise that'd be akin to saying they couldn't sell treasuries since that is the normal repo collateral for these things. They just used a different collateral. not a big fricking deal.

Those bonds had to be purchased somehow, whether it was stuff they were holding after a sale, that is still being financed somewhere, whether it's their debt or equity, or even a temp sec. line. There was no money created or lost since it was part of the Fed reserves either way and the funds are short-term repos, which expire *TUESDAY*.

The Fed probably did purchase above market rate, if only to get people to loosen things up. Additionally, they *only* did this to ensure the market implied Fed Funds rate was 5.25%. Do you understand what would have happened if that rate were to have opened up at 6% on friday? Do you understand how that would have triggered panic, runs on banks, and other events?

Nah, you don't care, you'd rather sit there bitching about a non-event because you want to see smart.

As far as
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
There was no money created or lost since it was part of the Fed reserves either way and the funds are short-term repos, which expire *TUESDAY*.
Right like you have the feds books to see if they really had a few billion in cash on hand. They expire Tuesday until they are renewed on Tuesday. It doesn't really matter if the fed has a vault full of money they can swim in or if they plucked the money out of thin air. At the end of the day either way they added a massive amount of cash to the system.

I don't see how you can call a move to prevent bank runs a non-event. I just wish the fed would release the names of banks that are basically bankrupted so I could make sure none of my money is near them. Not worth the risk for a few pennies a day in interest. I would be more concerned with the European banks they had something like 200 billion pumped in by the ECB.
 

smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Originally posted by: Allen Iverson
legendkiller is right on this one. smackdown stop trying to win the argument.
He is right and he basically agreed with everything I have said so far. Other then whining about terms and absolutes like not being able to sell. Which I already explained. I'm not going to go into a long sentence ever time I use the term. When I say they can't sell the MBS I mean they can sell them but only at a price where it will cause negitive rather then positive cash flow. Think being upside down on your mortgage you can sell your house for 400K but then you need to bring a check for 100K to the closing. If you don't have that 100K then you can't sell your house.

Same with banks if they wish to unload your 500K mortgage they can for 400K but they need to find 100K of cash somewhere so that their reserves are still at the required level. What the fed did is buy the 500K mortgage for more then 400K maybe they paid 401K or maybe they paid 1 million we don't know. This allows the bank to liquidate the mortgage without have to realize the loss.
 

JJChicken

Diamond Member
Apr 9, 2007
6,166
12
81
Originally posted by: smack Down
Originally posted by: Allen Iverson
legendkiller is right on this one. smackdown stop trying to win the argument.
He is right and he basically agreed with everything I have said so far. Other then whining about terms and absolutes like not being able to sell. Which I already explained. I'm not going to go into a long sentence ever time I use the term. When I say they can't sell the MBS I mean they can sell them but only at a price where it will cause negitive rather then positive cash flow. Think being upside down on your mortgage you can sell your house for 400K but then you need to bring a check for 100K to the closing. If you don't have that 100K then you can't sell your house.

Same with banks if they wish to unload your 500K mortgage they can for 400K but they need to find 100K of cash somewhere so that their reserves are still at the required level. What the fed did is buy the 500K mortgage for more then 400K maybe they paid 401K or maybe they paid 1 million we don't know. This allows the bank to liquidate the mortgage without have to realize the loss.
fair enough. i was just skimming through both of your posts and found some issues with yours and not with his. maybe i didn't read it completely.
 

Capitalizt

Banned
Nov 28, 2004
1,513
0
0
Heh, does it ever occur to you that Fed paid fair market price for those MBS? why does it have to be either above or below market rate?
If they were at a "fair market rate", the fed would not have bought them because they would have ALREADY BEEN SOLD to a willing buyer at that price.

"Fair market value" = the rate at which buyers and sellers freely agree to exchange property.

There were NO buyers at the price the fed was paying for these securities...so by definition, they paid above fair market value and diluted the money supply.

 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: smack Down
There was no money created or lost since it was part of the Fed reserves either way and the funds are short-term repos, which expire *TUESDAY*.
Right like you have the feds books to see if they really had a few billion in cash on hand. They expire Tuesday until they are renewed on Tuesday. It doesn't really matter if the fed has a vault full of money they can swim in or if they plucked the money out of thin air. At the end of the day either way they added a massive amount of cash to the system.

I don't see how you can call a move to prevent bank runs a non-event. I just wish the fed would release the names of banks that are basically bankrupted so I could make sure none of my money is near them. Not worth the risk for a few pennies a day in interest. I would be more concerned with the European banks they had something like 200 billion pumped in by the ECB.
Perhaps you should go visit some of the statements that reflect our currency reserves and such. It's not a "massive amount" of cash, hell, Microsoft has almost half that amount on-hand. Consider that one of their dividends was another massive relative proportion.

As far as the "money supply", there was no increase or decrease in the money supply. Those assets were backed by something and it wasn't dog crap. It was backed by more money in one form or another, all they did was take one asset and exchange it for another.

Additionally, the marks on 40bn in MBS securities, depending one what they were, are very small. Consider that the subprime market, just in 2006, generated about 400bn in bonds, 2005 it was about 200bn, 2007 another 100bn or so. The Fed didn't even take 10% off of the market.

As far as them making it so they didn't have to mark, it's a foolish concept, considering they won't hold them forever and you can't prove that they will. The Fed also put in another 40bn by repoing treasuries, but nobody is bitching about that.

As far as banks being bankrupted, get a fricking clue. If you look on the BS' of every bank you'll see that all have significant assets on hand compared to the problem. You seem to think that this was to stem the tide of losses. It wasn't, it was to stop a run on the banks and a complete liquidity freeze, I guess it's too simple for you to understand. While I do agree that they shouldn't be purchasing marketable securities, I think you're trying to make a huge issue of this.

I'm done with you, you're looking for problems where none exist.
 

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