FED Looking For Money??? Wild Stuff.

Some of these ideas sound like double-digit Bond yields could be in our immediate future. Oh my.  By the way, fellow futures watcher...futures gave it all up and fast. Now crashing red from very very green. 7:15pm PST  - Mr Mortgage

By GREG IP
April 9, 2008

WASHINGTON -- The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail.

Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed, which would issue debt under its own name rather than the Treasury's; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011.

• The Issue: The Fed has sold or committed a lot of its Treasury portfolio to support markets. Some worry it will soon run out of room to do more.

• The News: The Fed is considering several contingency plans for getting more lending capacity so that won't happen.

• The Bottom Line: The Fed has lots of firepower left before it has to turn to these contingencies.

No moves are imminent because the Fed has plenty of maneuvering room. The internal discussions are part of a continuing effort at the Fed, similar to what is under way at foreign central banks, to determine its options if the credit crunch becomes even more severe. Fed officials believe the plans largely eliminate the risk that the Fed will exhaust its stockpile of Treasury bonds and thus lose its ability to backstop the financial system, as some on Wall Street fear.

British and Swiss central banks also are contemplating contingency plans. For now, the European Central Bank is reluctant to consider options that require substantial modifications of its standard tools.

http://online.wsj.com/article/SB120768896446099091.html?mod=hps_us_whats_news

 

Comments

[Walter]

Mr Mortgage,

I really enjoy your blog and videos. I have a second mortgage with one of the banks in the hurt locker, can I buy it back at a deep discount? Know of anyone that has every succesfully done this at an individual level?

[Mr Mortgage]

shoot me your email address and I will get you some info.

mrmortgagetruth@gmail.com