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[quote=sholden;9093406]The Fed can't just do "direct capital injections" - the balance sheet has to balance after all. It can hand out cash in return for assets or it can hand out loans - obviously loans give it more bang per buck so to speak. But those loans are then "assets".
If the Fed loans $1 billion to Merrill Lynch (as a random example) then the asset side of the balance sheet is that $1 billion MER owes them - a MER bond in effect. Obviously $1 billion in US Treasuries would be less risky than $1 billion in MER bonds so the Feds assets are now riskier (some would say toxic given the state of the financial sector).
Right, but bonds from financials aren't what is being described as "toxic assets".
When that TARP money gets paid off, that will shrink the balance sheet. The banks have plenty of incentive to pay that money off as soon as they can.
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The Fed's taken toxic garbage as collateral on lots of those loans, the borrowers would be fools not walk away.
Are you saying that they are allowed to walk away from the TARP loans without filing for bankruptcy ? If they do that, how do they disentangle themselves from the onerous conditions imposed on TARP recipients ?
My understanding was that the TALF loans were collateralized, but I thought the TARP money was just handed out without any collateral.
Inflation is going to come when the Chinese and other foreign investors who have been buying up most the debt every time the govt decides to "print another trillion" to flush down the toilet.
Are you saying that they are allowed to walk away from the TARP loans without filing for bankruptcy ? If they do that, how do they disentangle themselves from the onerous conditions imposed on TARP recipients ?
My understanding was that the TALF loans were collateralized, but I thought the TARP money was just handed out without any collateral.
TARP is the US Treasury, is isn't the Federal Reserve in the first place, and hence not really relevant to the Fed trying to slurp back the money it created when the recession is over. Treasury has a very different set of restrictions than the Fed, they can't just create money in the first place after all.
And TARP was used to buy both preferred shares and warrants, which is similar to "just handing out" since an AIG warrant is worthless
China is buying more short term treasuries at the expense of long term ones. That's what you do when you expect inflation and/or interest rates are going to rise.
It also sets up an exit strategy for China, making is less painful for them to de-psuedopeg and let the dollar collapse.
JG -- I swear, I can't tell whether you're disagreeing with me or backing me up. The article you cited refutes your earlier position and supports mine:
"U.S. policymaker are eyeing the worrying rise in longer-dated bond yields, as the People's Bank of China, along with other central banks, shift their bond buying towards shorter-duration notes, Kowalczyk said.
The rise in longer-dated yields makes mortgages more costly and puts the U.S. economic recovery at risk.
Kowalczyk also said that, although Beijing will continue to invest in Washington's sovereign debt, such purchases will come under increased scrutiny as the U.S. fiscal position deteriorates."
Interest rates are going up; home prices are going down. It's unavoidable. Wake up.
its funny to see obama talking about running GM. he is just a moron politician, he cant run a business. with government in there and obama with his own agenda, GM is as good as dead. they should just pull the plug and skip the bankruptcy process. will save lots of lawyer fees and financial advisor fees.
its funny to see obama talking about running GM. he is just a moron politician, he cant run a business. with government in there and obama with his own agenda, GM is as good as dead. they should just pull the plug and skip the bankruptcy process. will save lots of lawyer fees and financial advisor fees.
A) Do you really think that Obama is personally going to "run GM"??
B) Apparently those in charge of GM didn't know how to run their business either, judging by the $50 billion that had to be pumped into them just to get them to survive bankruptcy.
A) Do you really think that Obama is personally going to "run GM"??
B) Apparently those in charge of GM didn't know how to run their business either, judging by the $50 billion that had to be pumped into them just to get them to survive bankruptcy.
i dont think he will personally run GM. however, he made a speech that said the government wont be running the business, they will only be involved in the most fundamental decisions. that sounds like they want to make the important decisions. that makes me think that with obama's agenda they will do dumb stuff like force GM to only buy from american suppliers, force them to only produce more fuel efficient vehicles and hybrids, etc. obama has his own political agenda that i think he would want to see applied with GM. obama pushes environmental crap, what better way to do that then force on of the largest manufacturers in the world to follow his agenda.
those running the business do have the additional burden of paying out on the UAW agreements from their predecessors. it puts them at a huge disadvantage having to sell cars that may be equivalent in mechanics but they have to sell them for thousands of dollars more because of their retiree benefits. it was a terrible idea to give GM money, and unfair to other auto makers who arent getting free money. however, even with the free money they dont stand a chance with their UAW obligations and now an Obama agenda attached to their mission statement.
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