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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Re: Government support for GSE assets and debt

Posted by WARREN MOSLER on November 25th, 2008


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Yes, the Fed is the agency that’s set up to buy financial assets, not the treasury as per the TARP.

They got that one wrong, this one right, in that respect.

Of course, no excuse not doing this a year ago- more evidence of a failure to grasp basic monetary operations.

>   
>   Just hitting the tapes!
>   *FED TO LEND UP TO $200 BLN TO INVESTORS IN ABS :FNM US, FRE US
>   *FED SETS UP TERM ASSET BACKED SECURITIES LOAN FACILITY :FNM US
>   *FED TO BUY MBS THROUGH ASSET MANAGERS, STARTING BY YEAR-END
>   *FED TO START BUYING GSE OBLIGATIONS NEXT WEEK :FNM US, FRE US
>   *FED TO BUY DIRECT GSE OBLIGATIONS THROUGH PRIMARY DEALERS
>   *FED PURCHASES OF GSE SECURITIES TO BE OVER `SEVERAL QUARTERS’
>   *FED SAYS SPREADS ON GSE DEBT HAVE `WIDENED APPRECIABLY’
>   *FED ACTION AIMED AT REDUCING COST OF CREDIT FOR BUYING HOMES
>   *FED TO BUY UP TO $500 BLN OF FANNIE, FREDDIE, GINNIE MAE MBS
>   *FED TO BUY UP TO $100 BLN OF `DIRECT OBLIGATIONS’ FROM GSES
>   *FED TO BUY UP TO $600 BLN OF GSE DEBT, MORTGAGE SECURITIES
>   


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5 Responses to “Re: Government support for GSE assets and debt”

  1. Jim Baird Says:

    Did we ever figure out why they didn’t simply come out and say that GSE debt is backed by FF&C, instead of this Rube Goldberg swap?

    Reply

  2. knapp Says:

    Warren,

    Isn’t Goldman’s issuance of $2-$3 billion in US Gov’t-backed debt at 200 bp over US (according to WSJ), just a huge gift to the arbs? Couldn’t the millions that will be made levering that trade be better spent putting able bodied people to work?

    Knapp

    Reply

  3. warren mosler Says:

    Jim, you must be new to how govt works! :)

    Knapp, it’s a govt loan to goldman and other banks who are entitled to govt funding, directly as in this case, or indirectly via fdic insured deposits.

    and yes, the financial sector has no value added, and the sooner we recognize that the sooner the average standard of living goes up maybe 25% as those people find employment in other areas that hopefully have some real value added.

    Reply

  4. Rich W Says:

    The financial sector is such a waste of talent and intellect. I tried for sometime last weekend to think of how they improve our lives and standard of living. Still noodling…

    Be interesting to see where the “smarter” ones end up. I understand more than a few physics/math majors work for investment houses.

    Reply

  5. warren mosler Says:

    ‘I tried for sometime last weekend to think of how they improve our lives and standard of living.’

    more time wasted by the financial sector!

    Reply

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