Fed’s New Plan: Unsecured Loans
Now that they have comprehensively destroyed unsecured lending, the Fed is said to be scheming to revive it. Sorry, won’t work, banks need to raise capital and they have no incentive to raise it as long as they can feast on subsidized lunches, courtesy of the Fed.
From the FT:
The Federal Reserve is working with the US Treasury on plans for a dramatic move into unsecured lending in the hope that this extreme step could help bring credit markets back to life.
As well as unsecured lending to banks, this could lead to the Fed directly purchasing commercial paper or funding a special purpose vehicle set up to do this.Any unsecured lending would be a radical departure for the Fed. Central banks the world over almost never make unsecured loans, and the Fed has never done so in its history.
October 6th, 2008 at 9:36 pm
Oh my. Bernanke has no playbook now and is much beyond his depression thesis.
October 6th, 2008 at 10:28 pm
This is depressing all right. I wish they would just let things take their natural course instead of throwing money at the problem the wrong way over and over again…
October 7th, 2008 at 2:26 am
this is what i don’t like at all with the fed, i don’t blame them for trying to bluff the market last august 2007, but it has been fairly clear at least since late last year that it doesn’t work, yet they keep doubling up.
October 7th, 2008 at 9:42 am
The printing presses are overheating. We are heading fast towards the second Weimar Republic…