posted on Oct, 7 2008 @ 10:33 AM
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
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.