Your Beloved Federal Reserve Buying Bonds By The Billions

Did you know that the Federal Reserve (Fed) is buying bonds--hundreds of billions worth with your tax money? They didn't ask permission, nor is the tactic working. This emergency strategy was brainstormed in '04 by Bernanke and Brian P. Sack, before Big Bernie became chairman and the housing bubble burst. Talk about wizardry! They knew exactly what we needed before we even knew we needed it!

Too bad when you buy hundreds of billions of dollars sellers jack the price up, "special just for you"...

It's nice they're being transparent about how much is being spent and what prices they are paying... But shouldn't we have a choice as taxpayers were our money goes? Or should it just by syphoned where ever TPTB deem appropriate? ....

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New York Times Article

Each morning Mr. Frost and his team face a formidable task: they must try to buy Treasuries at the best possible price from the savviest bond traders in the business.

The smallest miscalculation, a few one-hundredths of a percentage point here or there, could unsettle the markets and cost taxpayers dearly. It could also embolden critics at home and abroad who say QE2 represents a dangerous expansion of the Fed’s role in the markets.

“We are looking to get the best price we can for the taxpayer,” said Mr. Frost, a buttoned-down 34-year-old in a striped suit and rimless glasses.

Whether Mr. Frost will reach that goal is uncertain. What is sure is that market interest rates have risen, rather than fallen, since the Fed embarked on the program in November. That is the opposite of what was supposed to happen, although rates might have been even higher without the Fed program.

Mr. Frost’s task is to avoid paying top dollar for bonds that could be worth less when the Fed tries to sell them one day.

. . .More?

“A buyer of $100 billion a month is always going to be paying top prices,” Mr. Crandall said of the Fed. “You can’t be a known buyer of $100 billion a month and get a good price.”

Nevertheless, Mr. Frost and his team have been praised on Wall Street for creating a simple, transparent program. Neither the Fed nor Wall Street wants any surprises. The central bank is even disclosing the prices at which it buys.

Mr. Frost and his team work out of a small, beige corner office with arched windows that used to be a library. There, at about 10:15 most workday mornings, one of them pushes a button on a computer. Across Wall Street, three musical notes — an F, an E and a D — sound on trading terminals, alerting traders that the Fed is in the market.

On one recent Tuesday morning, what Mr. Frost and his five young colleagues did over a 45-minute period might have unsettled even a seasoned Wall Street hand: they bought $7.8 billion of Treasuries.

Want a little conspiracy fodder too?

Mr. Frost, and his boss, Brian P. Sack, insist the program has succeeded. Mr. Sack, 40, joined the Fed 18 months ago to run the entire markets group. He has a Ph.D. from M.I.T. and worked most recently for a Washington consulting firm. In 2004, he wrote a paper with Ben S. Bernanke, the future chairman of the Federal Reserve, and another economist about unconventional measures for stimulating the economy in extraordinary times — just like large-scale purchases of Treasuries.

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From wiki:

The Federal Reserve System (also known as the Federal Reserve, and informally as The Fed) is the central banking system of the United States. It was created in 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907.[2][3][4] Over time, the roles and responsibilities of the Federal Reserve System have expanded and its structure has evolved.[3][5] Events such as the Great Depression were major factors leading to changes in the system.[6] Its duties today, according to official Federal Reserve documentation, are to conduct the nation's monetary policy, supervise and regulate banking institutions, maintain the stability of the financial system and provide financial services to depository institutions, the U.S. government, and foreign official institutions.[7]

.....

According to the Board of Governors, the Federal Reserve is independent within government in that "its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government." However, its authority is derived from the U.S. Congress and is subject to congressional oversight. Additionally, the members of the Board of Governors, including its chairman and vice-chairman, are chosen by the President and confirmed by Congress. The government also exercises some control over the Federal Reserve by appointing and setting the salaries of the system's highest-level employees. Thus the Federal Reserve has both private and public aspects.[12][13][14][15] The U.S. Government receives all of the system's annual profits, after a statutory dividend of 6% on member banks' capital investment is paid, and an account surplus is maintained

Man, what gives with these criminals continuing unfettered in their desperate plight to suck the life out of our system?! Oh yea, money, power, associates with conflicted interest, lobbyist and of course loopholes! That keeps them above the law I guess!
This does not settle well with me, especially after watching Inside JobThread, about how we got into this financial crisis, and someone needs to go to jail!
So the only thing I can think of is someone needs to sue these bastards, and bring more public attention to these matters.
Thanks for bringing it onboard though, now we know.

spec

reply to post by speculativeoptimist


Not to be obtuse but... How could anyone sue the Fed? It seems almost impossible.

I'm glad the article clearly mentioned QE2 (quantitative easing). This is a very controversial tactic. Many economists believe that by simply injecting more and more new dollars into the system, dollars will become worth less, it will take more money to buy things as prices go up. (Inflation) And really that is all the Fed is doing, saying we'll create X billion dollars as a paper entry and credit it to the government when we buy government bonds, or other instruments.

So, in this cycle, the government counts the $X billion as new revenue and can spend it as needed, AND the Fed gets to claim a billion dollars in assets. After all, they just bought government bonds and those have to be worth a lot, don't they?

reply to post by donatellanator

I my have been the obtuse one, with an emotional knee-jerk response. I was not aware it was so impractical, but you are right. www.constitution.org...
So now what? Even when this stuff goes mainstream, it doesn't stick and nothing seems to get resolved.
Color me even more disenchanted with hope for our future....

spec
ETA: As far as motive? If one could obtain something of value for free basically, in terms of "we'll just print up the dollars," then yea, I can see them pursing it. Also as someone else mentioned, are there countries still interested in our bonds?

Originally posted by charles1952
I'm glad the article clearly mentioned QE2 (quantitative easing). This is a very controversial tactic. Many economists believe that by simply injecting more and more new dollars into the system, dollars will become worth less, it will take more money to buy things as prices go up. (Inflation) And really that is all the Fed is doing, saying we'll create X billion dollars as a paper entry and credit it to the government when we buy government bonds, or other instruments.

So, in this cycle, the government counts the $X billion as new revenue and can spend it as needed, AND the Fed gets to claim a billion dollars in assets. After all, they just bought government bonds and those have to be worth a lot, don't they?

I don't understand how a technically non-gov agency can buy bonds with tax dollars! Let's call a pig a pig and publicly admit the Federal Res. is Government in wolves clothing. Or silk, handweaved Armani....

Originally posted by speculativeoptimist
reply to post by donatellanator

 

I my have been the obtuse one, with an emotional knee-jerk response. I was not aware it was so impractical, but you are right. www.constitution.org...
So now what? Even when this stuff goes mainstream, it doesn't stick and nothing seems to get resolved.
Color me even more disenchanted with hope for our future....

We give up hope so easily! I don't care what anyone thinks-- we as citizens have Power! Most people don't understand economics or the tax system. This is why it must be dumbed down and spread.

"Do you want your tax dollars to be taken by a non-governmental organization/bank and then sold back to you at a premium when it was your tax money in the first place?"... With that logic instead of inserting mumbo jumbo, give the people the cut and dry of it. That's what makes 'em seethe.

Also, this has been in the works since 1913, make no mistake. If we as citizens are going to change the system it must be slow, gradual, and deliberate. This is the "tactic" used to sway anyone in any nation.

Think about it, there are 7 billion people...how can you make them all listen? It starts with a whisper, a plan, a pact of secrecy, an infusing of fear, employment of divide and conquer (anything can divide people), then you have them in your grips... Manipulation begins. Have an heir or two, keep it going. Rinse ("cleanse") and repeat.

Dear donatellanator,

I'm sorry I didn't write more clearly. I only wish they were using tax dollars, at least those are real. The fed creates an account and puts billions of dollars into it, imaginary dollars, electronic entry dollars. Then they knock on the door of the treasury and say "Hi! here's an account entry with umpty gazillion dollars in it. We'll give it to you if you give us some of your IOUs (government bonds) that you just printed. Deal?"

The Fed is up umpty gazillion in IOU's and the treasury has a new entry "Umpty gazillion transferred from Fed."
Everybody is happy except for a large number of economists who are tearing their hair out and warning of real troubles. (And consumers when, and if, inflation hits.)

Plain and simple, The Fed is buying the bonds cause no one else will especially China. When the FED gives up or China comes to claim their money we are gonna need to fight off. This place needs a wholesale wipe out and do over.

Smoke and Mirrors economics. The FED not the Treasury issues the currency (since 1914...after the passage of the Federal Reserve Act in late 1913). Have to watch both hands (left hand issues and right hand buys) for their sleight of hand. I wonder when it will officially be called "monetization."

reply to post by donatellanator

I don't understand how a technically non-gov agency can buy bonds with tax dollars!

I can't ever seem to find a straight answer to this either. Are they officially non-gov? Does that answer conveniently depend on the circumstances?
Thanks for the support too, I can frown easier than smile these days, but ultimately I think the worse things get, the closer we are to significant change, for the better.

spec

In any other business, the bigger the buyer, the BETTER deal you get, not the worse. Oh, mr smith, you want 10,000 widgets, that will be 15% off the normal price, if you were only buying 10


I hate all this rubbish