Fed Decides to buy MORE Mortgage Backed Securities

Whoa, chill man. Just because this one thread got no responses doesn't mean nobody cares. Try taking a look around the rest of the politics section. But yea, insanity.

 

I'm sure this is bad because it is something the Fed did, but I didn't respond because I have no clue what mortgage backed securities are.

Banker language is very confusing and seems to be full of euphemisms.

 

You posted that 5 minutes after your original post heh heh. Maybe nobody saw it or they were thinking of a response. And as fucked as we are, I'd still rather live here than in Canada. Home is where the heart is at brudda

 

I don't think anything the Fed does is in the interest of the masses, so this didn't really come as a surprise to me.

The bankers are just going back to their old practices, which proved to work out extremely favorably.

 

Can somebody explain what is going on here? Maybe I'm just ignorant of basic finances because I'm young but this seems like banker language to me and I have no clue what it means.

 

LoL, my bad. I missed a day in there. And yeah, apathy is a disease in this country. You get shit on by government so often, you tend to get hardened to it. It's sad but a lot of Americans probably feel drained and helpless by the constant barrage of lies and corruption they endure from politicains on an almost daily basis.

 

In effect the fed has bought morgages, the loans themselves that is. It is to give the banks more spending cash in an effort by the fed to get credit moving again (banks lending) to stimulate business growth and so the economy.

The down sides of the practice are that the fed usually just creates the money with which they are buying the debt which runs a risk of devaluing the currency. The other that the morgages (the ones the banks want to sell anyway) are probably residential and since the collapse of the housing market a lot of them are in negative equity (the house is worth less than the morgage.)

I think that covers it

 

A security is a contract investment like a bond something. Asset backed securities, like morthage backed securities, are investments into a single or a pool or assets with the hopes of gaining income on the investment.

So big banks were encouraged, and sometimes forced, by the government to purchase mortgage backed securities so as to free up capital and expand the housing market. When the phony market crashed people started defaulting on loans and housing values plummeted, destroying the securities market built around it.

Basically, the government created an artificial market, inflated it, and now that it has collapsed they are making us pay for it.

So taxpayers are insuring a practice known as gambling, and the people who end up benefiting are the ones up top.

 

Let's keep re-inflating the bubble. Genius.

 

For all the people calling 'insanity!', you are aware as to why the FED thinks this would be a good idea, inasmuch as it would encourage banks to lend more, having less of these bad assets on the books, correct?

I don't know enough about economic history to be able to say definitively one way or the other that 'inflation+loans>no inflation+no loans' or vice versa.

Personally my instinct would be that Americans are hurting now so, while policies that promote inflation in the long term would be a poor choice if the economy were doing fine, considering the current crisis it seems acceptable to me.

Honestly I wish more people on this forum would back up their opinions with insight as to why they hold such opinions; it would really allow for a more constructive, informative exchange of ideas.

 

I missed out that the money created needs to be paid back .

The thing i don't like about this policy, other than supporting banks that by capitalist standards should be allowed to fail allowing new business to grow and replace it with taxpayers money, is that the debt they buy is already failing. What if all those homeowners walk from the morgage, that means the gov gets a load of residential property at a small %of what it paid ($1.25trillion this time i think it was) and still needs to pay back the original ammount borrowed. That or sell the securities at a loss when the banks have recovered.
There is also the risk the banks won't forward credit (as is the case now and the reason for more bail out cash) which stagnates the market and slows recovery.

The Bank of England thankfully ruled not continue with the policy for the time being this week although it kept the option open if needed.

 

So the rich and poweful can stay rich and powerful. The member banks of the Fed are the same ones benefitting from their policy.

The central banks we've had have all used the same trick. Pump-prime and run.

Please read these words of Andrew Jackson, the bankslayer... they represent your sentiments:

"Gentlemen, I have had men watching you for a long time and convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You say that if I take the deposits from the bank and annul its charter, I ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families that would be my sin![/quote] You are a den of vipers and thieves."


Jackson went on to eliminate the bank and our national debt.

 

Look, I'm not trying to throw my support towards 'the rich and powerful'; I've no incentive to do that, clearly. I don't want the banks to reap more profits at the taxpayers' expense, but it's more important to me that they start lending money again. Removing some of the bad assets from their records should help nudge them towards a state of increased lending which would lead to increased spending, job creation, etc.

edit: also, could you give me a brief history lesson on how exactly Jackson went about to eliminate the bank?

 

So, a good way to create jobs is for the taxpayer to bail out the large banks, thus taking the risk out of the bank's gambling? Why can't the government bail me out when I lose big on a risky asset?

I believe there are much better ways to increase employment rather than handing billions over to financial institutions that helped cause the crash.

 

Short of establishing a government-run bank, what other methods would you suggest that be undertaken in order to get loans flowing again? I suppose tax cuts might seem like a decent method; if people increased their consumption that might compel businesses to expand. However, people are afraid right now; they realize the economy is fragile and they're not just going to go out and spend like crazy; they're going to save.

I really feel like increasing the availability of financing is the better route to improving the economy. If removing bad assets from existing banks is out of the question, then short of establishing a government-run bank, what other methods would you suggest?