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Sep 16th, 2012 @ 11:19 am

Fed Announces More Open Ended Quantitative Easing

This is a big deal: The Federal Reserve announced this afternoon that it would pursue a third round of quantitative easing, known as QE3. And unlike previous rounds, this one has no predetermined end date.

The central bank said that it will continue adding to its balance sheet by about $40 billion each month — essentially creating additional currency and adding it to the money supply — indefinitely. The Federal Reserve also made clear that it will extend its current “exceptionally low” interest rate on federal funds through at least the middle of 2015.

*How is this not the biggest news story?!? The Fed announces that it will just print $40 billion a month until the economy is fixed. How the fuck does that make any sense? The economy is shit, average people are broke, and the Dow is soaring. The whole financial system is corrupt. This isn’t just dumb, it is evil. 

Quantitative easing is frequently described as “unconventional monetary policy,” but the open-ended nature of this bond-buying commitment is unique even by the standards of previous actions. It brings the Federal Reserve closer to a policy idea that’s become known as NGDP (Nominal Growth Domestic Product) targeting, in which the Fed basically says it will continue buying bonds until the economy reaches a certain target level of inflation and growth. This new round of QE isn’t pegged to any sort of economic target, but it does commit the Fed to printing money until, well…whenever it feels like stopping. But taking this idea on its own terms, the Fed’s announcement might undermine the way NGDP targeting is supposed to work. The idea is that the Fed provides both confidence and clarity: It will print money until certain well-established targets are met, and boost demand and economic activity as a result. But without a defined target, the uncertainty still exists.

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Apr 18th, 2012 @ 10:49 pm

Federal Reserve Officials Leave For Wall Street With Privileged Info

One of the few things not redacted in the Fed’s FOIA response is the list of officials who attended each confidential meeting. Many of those people have since left the central bank and gone to work in the financial industry, taking with them privileged information about the Fed’s thinking that is still closed to the public.

Take Susan Bies. A onetime member of the Fed Board of Governors, she was involved with the Financial Stability Forum, an international group of central bankers, finance ministers and the like, and, according to Forbes, ”led the Fed’s efforts to modernize the Basel capital accord.” Bies now sits on Bank of America’s board.

Meredith Beechey is now at Sveriges Riksbank, Paul Connolly is at Eastern Bank/John Hancock Life Insurance Co., and Benson Durham is at the Capital Group Companies. Joseph Gagnon, Michael Gapen and Jon Greenlee have moved on to the Peterson Institute, Barclays Capital and KPMG, respectively. Brian Madigan also went to Barclays, and Nathan Sheets is now at Citigroup.

At least eight other meeting participants have moved on to private financial institutions.

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Aug 26th, 2011 @ 5:29 am

How the Banks Received $1.2 Trillion in Secret Loans during Financial Crisis

 
The Fed’s Secret Liquidity Lifelines [bloomberg.com] reveals when and which banks and other companies (e.g. GE, Ford, Toyota) received over $1.2 trillion in public money between August 2007 and April 2010. Bloomberg News had to aggregate and analyze over 29,000 documents to discover over 21,000 different loans, which can know be analyzed and contrasted with each other.
In practice, the collection of line graphs show the exact dates the loans occurred and were closed for a specific company plus the historical market value of that company. Peak borrowing amounts, borrowing timelines and average balances can be easily compared.

From HuffingtonPost:


The scope of the Fed’s private lending had previously only been guessed at, but figures obtained under the Freedom of Information Act by Bloomberg News show that the nation’s central banker issued loans to more than 300 institutions between August 2007 and April 2010, including over 100 loans of $1 billion or more.
While the Fed’s loans likely helped to prevent a complete implosion of the global banking system, analysts say they fear the loans may have contributed to an atmosphere of complacency on Wall Street. Banks that received emergency cash infusions during the crisis may now believe the Fed will always be there to bail them out of trouble, the thinking goes.
"It is a classic case of moral hazard," Dimitri Papadimitriou, president of the Levy Economics Institute of Bard College, told The Huffington Post.
The Federal Reserve itself had argued that the details of its emergency loans should be kept out of the public eye, claiming that the reputations of the firms involved could suffer if they were seen to be taking money from the government in order to stay afloat. Many of the banks that borrowed from the Fed had previously appealed to the Supreme Court to keep those records secret.
However, an invocation of the Freedom of Information Act forced the Fed to release more than 29,000 pages of documents, revealing the extent to which the financial sector relied on Federal Reserve dollars during the worst days of the crisis.

How the Banks Received $1.2 Trillion in Secret Loans during Financial Crisis

The Fed’s Secret Liquidity Lifelines [bloomberg.com] reveals when and which banks and other companies (e.g. GEFordToyota) received over $1.2 trillion in public money between August 2007 and April 2010. Bloomberg News had to aggregate and analyze over 29,000 documents to discover over 21,000 different loans, which can know be analyzed and contrasted with each other.

In practice, the collection of line graphs show the exact dates the loans occurred and were closed for a specific company plus the historical market value of that company. Peak borrowing amounts, borrowing timelines and average balances can be easily compared.

From HuffingtonPost:

The scope of the Fed’s private lending had previously only been guessed at, but figures obtained under the Freedom of Information Act by Bloomberg News show that the nation’s central banker issued loans to more than 300 institutions between August 2007 and April 2010, including over 100 loans of $1 billion or more.

While the Fed’s loans likely helped to prevent a complete implosion of the global banking system, analysts say they fear the loans may have contributed to an atmosphere of complacency on Wall Street. Banks that received emergency cash infusions during the crisis may now believe the Fed will always be there to bail them out of trouble, the thinking goes.

"It is a classic case of moral hazard," Dimitri Papadimitriou, president of the Levy Economics Institute of Bard College, told The Huffington Post.

The Federal Reserve itself had argued that the details of its emergency loans should be kept out of the public eye, claiming that the reputations of the firms involved could suffer if they were seen to be taking money from the government in order to stay afloat. Many of the banks that borrowed from the Fed had previously appealed to the Supreme Court to keep those records secret.

However, an invocation of the Freedom of Information Act forced the Fed to release more than 29,000 pages of documents, revealing the extent to which the financial sector relied on Federal Reserve dollars during the worst days of the crisis.

(Source: infosthetics.com)

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