seekingalpha.com — Is the $700 billion being disguised as a bailout for banks, when it is really for bailing out the Federal Reserve? Is it a way of avoiding the embarrassment of walking into Congress and admitting the truth of the need for Congress to authorize issuance of new Treasury bills to recapitalize the nation’s central bank?
Sep 25, 2008 View in Crawl 4
Closed AccountSep 25, 2008
Probably going to line the pockets of corporate criminals, federal reserve front men, industry insiders and select participants in the administration in on the scam who made it all happen..with a few bucks on the side tossed out to their bankster friends on Wall St. How would we ever know? It's not like we have any real accountability or oversight for anything. Dick Cheney could be blowing the whole wad on diet coke and duck hunting gear for all we know..
avengingturnipSep 26, 2008
After reading some of the articles, I began thinking about the $700 billion bailout. I took the time to recalculate the Federal Reserve balance sheets, and suddenly realized that it has accepted almost exactly $700 billion worth of toxic mortgage paper, in return for ostensible loans that many of the big banks cannot possibly repay. It just so happens that that is the sum of money they want to extract from Congress. You can’t help but see that the so-called “loans”, given by the Fed to the banks, have changed the composition of its balance sheet dramatically. The Fed’s assets went from nearly 100% liquid Treasury bills, to mostly illiquid “cash for trash” mortgage bonds. The illiquidity of the mortgage bonds would mean that the Fed could no longer raise sufficient funds to adequately support the PPT conspiracy, if, in fact, that is what it wants to do. I call the illiquid securities “cash for trash” because the Fed has given treasury bills or cash in exchange for these distressed mortgage backed securities. They are supposed to hold the bonds for a very short time, but, in fact, most of the cash for trash loans have been endlessly renewed, month after month. Assuming, however, that Congress passes the bailout bill, the U.S. Treasury will have authority to buy these same bonds permanently, removing a headache for the Fed, and freeing up its balance sheet to continue funding for the market manipulation that PPT theorists allege.Let’s indulge ourselves, for a moment, and assume that PPT does exist. If so, the $700 billion bailout is not only for insolvent banks. They already have gotten rid of these toxic assets by placing them with the Fed, and obtaining endlessly renewable Fed loans in return. It appears to be a bailout of the Federal Reserve, itself. The Fed, of course, according to PPT theory, acts as the PPT’s private slush fund. Money is taken out to pump up stock prices, and then taken back in so that prices will fall. The PPT players profit on the movements of the market, induced by this activity.