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Fed to buy massive amounts of short-term debt

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posted on Oct, 7 2008 @ 09:42 AM
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Fed to buy massive amounts of short-term debt


biz.yahoo.com

The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debt in a dramatic effort to break through a credit clog that is imperiling the economy.
The Federal Reserve, invoking Depression-era emergency powers, will buy commercial paper, a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.
(visit the link for the full news article)




posted on Oct, 7 2008 @ 09:42 AM
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Keep a very close eye on this one, folks. This isn't Paulson and his new messianic superhero powers coming into play, this is Bernanke and the Federal Reserve doing this. Unprecidented! I understand what their stated goal is, but I am dumbfounded in trying to figure out what the real motivation is for the fed to buy all this short term debt.

Considering it's the fed and not the government, I don't think them holding the debt means they can after defaulters any more agressively than the original creditor could have. At least in theory that is true, who the hell knows with these people just how blurred the line between private Federal Reserve & the government has become?

biz.yahoo.com
(visit the link for the full news article)



posted on Oct, 7 2008 @ 09:46 AM
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I heard it on NPR this morning and was speechless for a few moments.

Looks like this country can't do anything in moderation. First, there is a capitalistic free-for-all and the pyramid scheme with real estate, under the watch of de-regulators like Bush and McCain. When that fails, these clowns effectively socialize companies! Sheesh.

Seriously, in the event of debt failure the govt is entitled to company's assets, making it a socialist enterprise.



posted on Oct, 7 2008 @ 09:59 AM
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Are they buying this directly from the companies or buffering these purchases through the banks?



posted on Oct, 7 2008 @ 10:01 AM
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reply to post by Mainer
 


...and selling it the Saudis as debt for Oil



posted on Oct, 7 2008 @ 10:02 AM
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I have a car loan and a large credit card balance that I want them to buy up. If they paid for them I would have a lot more money to pay for goods and services clearing up my credit log!

.



posted on Oct, 7 2008 @ 10:25 AM
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The markets are just loving this news . . . down almost 90 points now.

The fed buying up debt kinda makes me think of how some people pay one credit card by maxing out the other . . .

Bad business and it can only end ugly.



posted on Oct, 7 2008 @ 10:29 AM
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Originally posted by Mainer
Are they buying this directly from the companies or buffering these purchases through the banks?


They buy commercial paper, and from what I heard directly.



posted on Oct, 7 2008 @ 10:33 AM
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No, these are mostly centered around commercial lending if I understand correctly, not private personal debts.

In theory, it actually is a move that makes some sense, at least. The fed will purchase bad business debts from creditors, hopefully giving them enough confidence to resume lending to businesses that have good credit and will repay their loans. This isn't happening right now because the creditors claim to be overloaded with too many bad debts and the risks are too high for them to lend.

The fact that this is actually the Federal Reserve purchasing these debts outright rather than simply setting up some sort of insurance program to protect creditors is what concerns me the most. The Fed has always had lending programs direct to banks active. This step essentially removes the bank as the middle man and means the fed has just become the direct creditor to high risk businesses which have taken out loans or lines of credit and either defaulted or are at risk for default on them. Which is where I raise an eyebrow. The government already passed new legislation making it much more difficult for personal debt to be resolved through bankruptcy several years ago... this move looks to me to serve an alternate purpose of preventing small businesses from getting out of their debts via bankruptcy (which was part of the Bush Bankruptcy law that was pushed but did not pass...)

It is about a hundred times more difficult to get out of a debt owed to the government than it is to get out of an unsecured debt to a private creditor. That's why I was curious if the fed was doing this under the umbrella of their real persona: a private central banking authority, or if this was being done with further expansion of their powers, them acting like an extension of the federal government complete with autonomy from collection laws & standards. If it's the latter, we could very easily see the Federal Reserve pulling IRS-style business take overs within the next year as these businesses default on loans and the fed steps in saying "OK, you owe so we're taking over your business." If that's the case, then this is a miserable new development in this financial crisis mess.



posted on Oct, 7 2008 @ 10:41 AM
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Well, Paulson promised us that only the $700bn (+ the $180bn pork added)was the only solution to free up the frozen credit markets.
The President made 2 pleas & threats also.
The Fed. made appox $1Trillion in loans to the banks & 'primary dealers'


the act is... like myself & others pointed out...
the Banks & elite execs can get glutted with money/liquidity/recapitalization...
but there is no guarantee they will lend any money !!
& that's just what is happening !

the banks know they & other banks have Trillions in counter party swaps & risk laden derivatives that will need to be paid, very soon...
and they are keeping their bankrolls to help alleviate a possible insolvency, bankruptcy status & personal unemployment, ...


the bankrolls that Paulson/Bernanke/Bush got duped into handing over to them.

[edit on 7-10-2008 by St Udio]



posted on Oct, 7 2008 @ 11:08 AM
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reply to post by burdman30ott6
 


That was a great summary. Thanks for that. If that is the case, I can't believe that the word isn't getting out. Why isn't the press informing everyone of the possible ramifications of this? All of this is simply getting WAYYYYY out of hand. It's quite disturbing.




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