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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.
Originally posted by anachryon
Ask yourself - if the Fed is going to loan out money without requiring any collateral in return....where is that money coming from?
...However, the US central bank does not believe it has the legal mandate to make unsecured loans on which there is a reasonable likelihood of some loss. So it needs the Treasury to guarantee losses on the loans, probably under new authorities granted by Congress last week with the passage of the $700bn (€518bn, £402bn) Paulson plan. ...
Originally posted by Dermo
From someone typing the sum into some software and hitting return.
This kind of 'Money Creation' is a huge part of what got the Global banking system into this mess in the first place.
Originally posted by mybigunit
Wow you have been on top of these stories along with the CDS story. Good find. Im trying to figure out the overall objective in this whole mess.
Eggs-acktly, mi amigo. It's quite potentially an inflationary move, which either means there are other forces at work