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May 03, 2010 "Information Clearing House" - -The right-wing think-tank, the American Enterprise Institute, is helping the Federal Reserve to develop a strategy to transfer $1.25 trillion in toxic mortgage-backed securities (MBS) and non performing loans onto the public's balance sheet.
Although it's unknown whether Fed chair Ben Bernanke will act on the AEI's recommendations, it does show that the Fed's Quantitative Easing program (QE)--which moved the bulk of garbage assets from the banks to the Fed's balance sheet--poses long-term problems that will need to be addressed. Bernanke never intended to keep these assets any longer than necessary. Now he is actively exploring options for getting rid of them.
Ostensibly, the QE program was designed as the first leg in a two-step process to remove the bad paper from the banks balance sheets and then dump it on Fannie Mae and Freddie Mac as discreetly as possible. So far, Bernanke has been relatively successful in convincing people that he was buying the assets to increase lending, which was clearly never the objective. Quantitative Easing was a fraud from the get-go. Here's an excerpt from the AEI's web page by the eerily-named "Shadow Financial Regulatory Committee" which explains what's going on:
"Freddie and Fannie have been placed in conservatorship and the Treasury has confirmed that their debt is now guaranteed by the U.S. Government. This means that their debt is essentially identical to Treasury debt. The Treasury could simply issue Treasury debt to Freddie and Fannie with the offsetting accounting transaction being an IOU to the U.S. Treasury. Freddie and Fannie could then swap the acquired Treasury debt for MBS held by the Federal Reserve.