"The ownership is highly restricted in that such ownership is mandatory; the shares can’t be sold; and they pay a guaranteed 6% annual dividend.'.
Last year the "private owners" received $1.7 billion in dividends, the Treasury about $100 billion."
Irrelevant to the question at hand.
"Do you have any idea how dumb that is?
Yeah, probably not a good idea, but when the US jovernment guarantees a debt, that makes it solid."
Not all MBS were originated at Fannie and Freddie. The majority were "private label" and carry the same risk as if they were held by any other private bank..
"The fed is the last resort lender to the fed govt
Lender of last resort to the banking system, not to the Federal government."
Unfortunately the fed has become the last lender to the govt and is now the second largest holder of us securities. While technically not "loans" the fed is propping the govt up by buying securities which otherwise would flood the market requiring larger promised returns aka interest payments..
"So if the fed gets in trouble
How in the world would the Fed get in trouble? Spell it out."
The same way any other private bank gets in trouble. The same way the other big banks got in trouble, by purchasing bonds and securities that are in actuality worth pennies on the dollar as compared to the purchase
price.
"No, the lack of losses came before the Fed purchase, when the Treasury guaranteed them."
And you base this on what?"
It was in all the papers. Here.
A key component ... reasury Department
$187bil? A drop in the bucket. Do you realize that in QE3 alone the fed purchased nearly 1/2 trillion in MBS/FAD?
Purchases from freddiie and fanne are not labeled MBS, but are listed as Federal Agency Debt.
"And you honestly believe that what is being purchased are the subprime MBS that went belly up at the beginning of this mess?
No. The Fed did not buy subprime MBS. The Fed bought guaranteed MBS".
Sorry that's just not true. If they were guaranteed they would have been sold in the private sector. Private label MBS are guaranteed by no one.
"Those "toxic assets will never see the light of day. They will reside on the fed balance sheet forever.
The toxic assets that they never bought are not on their balance sheet. Not now, not ever, never."
Are there will always be there until the fed "writes them off".
"Suppose that the Federal Reserve loses $100B buying junky mortgage bonds. Normally, the Federal Reserve turns over any surplus “profit” to the Federal Government. Via the “negative liabilities” trick, the Federal Reserve deducts any bailout losses from the Federal Reserve’s payments to the Federal government."
"Again from what you are saying there was never a problem.
There was a huge problem. Trillions in loans to bad risks, thanks in part to moronic government pressure on banks to get poor people to buy homes."
Now that we can agree on. Those trillions were not absorbed by the banks. they were purchased by the fed.
"All these "toxic assets" were actually good debt.
No. Toxic assets are toxic assets. Assets that were guaranteed by the government are not toxic assets."
Unfortunately, private label MBS are guaranteed by no one. On the order of 1/4 tr under QE3 alone.
"Unlimited resources? This would be the fed govt?
For all intents and purposes, yes."
As long as the rest of the world has faith in the us borrowing and printing forever. A rather risky assumption at best.
I challenge you to find any source that states that the fed reserve debt is guaranteed by the fed govt.
"They own US Treasuries. Are they guaranteed?"
Yes, again as long as the rest of the world has faith in our ability to borrow and print.
"They own Fannie and Freddie MBS. Fannie and Freddie are now in government conservatorship.
I think that means they are guaranteed. If you can show they are not, I'll alter my claim."
Again fannie and freddie technically aren't MBS they are FAD.The MBS are private label debt and are guaranteed by no one. Roughly half the purchases under QE3 were MBS not FAD. !/4 trillion on QE3 alone.
"And if it was, the fed govt would have to turn to the fed to have the fed purchase more treasury notes which of course would weaken the feds balance sheet
Ummmm......why would more Treasury Notes weaken the Fed's balance sheet?
It sounds like you don't understand accounting either."
And you don't seem to understand the inflationary and confidence issues raised by a govt that continually turns to it's central bank to create "money" out of thin air in order to purchase fed treasuries to keep the govt operating. The idea that this can continue forever is crazy and dangerous. Sooner or later it's going to come back to bite us in the butt.
Last year the "private owners" received $1.7 billion in dividends, the Treasury about $100 billion."
Irrelevant to the question at hand.
"Do you have any idea how dumb that is?
Yeah, probably not a good idea, but when the US jovernment guarantees a debt, that makes it solid."
Not all MBS were originated at Fannie and Freddie. The majority were "private label" and carry the same risk as if they were held by any other private bank..
"The fed is the last resort lender to the fed govt
Lender of last resort to the banking system, not to the Federal government."
Unfortunately the fed has become the last lender to the govt and is now the second largest holder of us securities. While technically not "loans" the fed is propping the govt up by buying securities which otherwise would flood the market requiring larger promised returns aka interest payments..
"So if the fed gets in trouble
How in the world would the Fed get in trouble? Spell it out."
The same way any other private bank gets in trouble. The same way the other big banks got in trouble, by purchasing bonds and securities that are in actuality worth pennies on the dollar as compared to the purchase
price.
"No, the lack of losses came before the Fed purchase, when the Treasury guaranteed them."
And you base this on what?"
It was in all the papers. Here.
A key component ... reasury Department
$187bil? A drop in the bucket. Do you realize that in QE3 alone the fed purchased nearly 1/2 trillion in MBS/FAD?
Purchases from freddiie and fanne are not labeled MBS, but are listed as Federal Agency Debt.
"And you honestly believe that what is being purchased are the subprime MBS that went belly up at the beginning of this mess?
No. The Fed did not buy subprime MBS. The Fed bought guaranteed MBS".
Sorry that's just not true. If they were guaranteed they would have been sold in the private sector. Private label MBS are guaranteed by no one.
"Those "toxic assets will never see the light of day. They will reside on the fed balance sheet forever.
The toxic assets that they never bought are not on their balance sheet. Not now, not ever, never."
Are there will always be there until the fed "writes them off".
"Suppose that the Federal Reserve loses $100B buying junky mortgage bonds. Normally, the Federal Reserve turns over any surplus “profit” to the Federal Government. Via the “negative liabilities” trick, the Federal Reserve deducts any bailout losses from the Federal Reserve’s payments to the Federal government."
"Again from what you are saying there was never a problem.
There was a huge problem. Trillions in loans to bad risks, thanks in part to moronic government pressure on banks to get poor people to buy homes."
Now that we can agree on. Those trillions were not absorbed by the banks. they were purchased by the fed.
"All these "toxic assets" were actually good debt.
No. Toxic assets are toxic assets. Assets that were guaranteed by the government are not toxic assets."
Unfortunately, private label MBS are guaranteed by no one. On the order of 1/4 tr under QE3 alone.
"Unlimited resources? This would be the fed govt?
For all intents and purposes, yes."
As long as the rest of the world has faith in the us borrowing and printing forever. A rather risky assumption at best.
I challenge you to find any source that states that the fed reserve debt is guaranteed by the fed govt.
"They own US Treasuries. Are they guaranteed?"
Yes, again as long as the rest of the world has faith in our ability to borrow and print.
"They own Fannie and Freddie MBS. Fannie and Freddie are now in government conservatorship.
I think that means they are guaranteed. If you can show they are not, I'll alter my claim."
Again fannie and freddie technically aren't MBS they are FAD.The MBS are private label debt and are guaranteed by no one. Roughly half the purchases under QE3 were MBS not FAD. !/4 trillion on QE3 alone.
"And if it was, the fed govt would have to turn to the fed to have the fed purchase more treasury notes which of course would weaken the feds balance sheet
Ummmm......why would more Treasury Notes weaken the Fed's balance sheet?
It sounds like you don't understand accounting either."
And you don't seem to understand the inflationary and confidence issues raised by a govt that continually turns to it's central bank to create "money" out of thin air in order to purchase fed treasuries to keep the govt operating. The idea that this can continue forever is crazy and dangerous. Sooner or later it's going to come back to bite us in the butt.
