Fed's $800 billion plan to bolster lending, housing
NEW YORK (MarketWatch) -- With financial markets still not working smoothly two months after almost shutting down, the Federal Reserve unveiled further steps Tuesday aimed at lowering borrowing costs for consumers and home buyers.
The Fed has pumped billions of dollars into financial institutions, but found that this was not enough to bring institutional buyers and sellers of key mortgage and lending products back to the market.
In general terms, economists welcomed the Fed's latest actions, although some critics complained it doesn't make sense to encourage Americans to borrow more.
The U.S. central bank hopes the plan to lend to the markets for asset-backed-securities will create liquidity, which in turn would encourage originators of consumer loans to restart lending to individuals.
The markets for asset-backed securities "historically have funded a substantial share of consumer credit and SBA-guaranteed small-business loans," the Fed said in a statement detailing the new loan facility.
The facility is designed to generate increased credit availability and to support economic activity by facilitating renewed issuance of consumer and small-business asset-backed securities at what the Fed called "more normal interest-rate spreads."
Ashraf Laidi, chief foreign-exchange strategist at CMC Markets, said the Fed "is well on its way of following the Bank of Japan's policy of quantitative easing -- targeting the quantity of money rather than its price."
However, government officials denied the program was quantitative easing, noting that the Japanese central bank added reserves to influence bank behavior. By contrast, the U.S. program's aimed at investors, the officials commented.
The Fed will be adding reserves to its balance sheet, which has already grown by $1.3 trillion this year as a result of the program.
http://www.marketwatch.com/news/story/fed-bolster-consumer-lending-tune/story.aspx?guid=%7BC3B72C58-6CB5-4DB1-B986-8A65E005FDE4%7D&dist=msr_12
Brilliant! Let's create some more asset backed credit derivatives, that should fix EVERYTHING. Can it get any more f*cked up than this folks? Kiss the US Dollar buh-bye.
"You can lead a horse to water, but you can't make him drink."
"You can offer to borrow consumers money for free, but you can't make them borrow it."
Didn't cheap credit create this financial quagmire to begin with? It most certainly did. Then why is Hanky Panky Paulson and Bumbling Ben Bernanke obsessed with recreating cheap credit to jump start the economy? Their quest to deliver ever cheaper credit to consumers is all the proof one needs that the "boom years" so many long for were a "great big lie". If the country needs to borrow money to make the economy go, then we really do not have any economy at all.
How long will it be before these financial wizards are sending us a check once a month in the mail with a simple note attached, "Don't spend it all in one place"? This is freaking ridiculous. Patently pathetic. Why has the general public wised up to the debt burdens of our society, and not the government. The government should be encouraging us to save. The country is bereft of wealth. We have had a negative savings rate for several quarters in a row now. Americans can barely pay off the debt they have on there backs now, why would they take on more? Especially in the face of mounting job losses? Is our society, our capitalist nirvana, so screwed up that the only way we know how to buy anything is to "buy now and pay later"?
Why should the banks lend anybody money? If the bank thinks you can't pay back a loan, why should they give you a dime? How long will it be before the government is forcing banks to make "bad loans"? Not a damn thing these clowns has proposed or set in motion has a snowballs chance in hell of reversing or stopping today's financial calamity. All they have done is try to perpetuate a bad situation, and in the end, make it worse.
How long will it be before the government buys up ALL the debt in the country? Why don't they quit playing games, and just declare everybodys debt paid. If all debt was taken off the books, Americans would have more cash than they knew what to do with. Provided they had a source of income. LOL, that will never happen, or maybe...
No surprise that Gold has struggled some today. The overhead supply of Gold between 828 and 835 could keep the Gold Bulls penned up for a little while longer. It was surprising though that Gold struggled this much with the Dollar getting beat down again today, falling below 85 on the Dollar Index. Weak oil prices are rarely seen in conjunction with a weak Dollar, and would appear to this observer that the weakness in Oil today gave the Gold Bulls pause. It is well past time for Gold to dispense with this correlation to Oil prices. Gold is money, and the day is not that far off where it may be Gold that is the only acceptable form of payment for Oil.
Gold dipped to 803 early this morning from yesterday's high of 829 and rebounded to retest that high at 831 mid-day today on weaker technicals. Some consolidation may be in order before Gold can crash through this resistance zone between 828 and 835. Silver as always of late rode the coat tails of it's big brother. 10.50 Silver is a wall that must fall before the entire Precious Metals group can push higher in anticipation of a Dollar collapse, and rampant hyperinflation.
Gold Buyers Make "Significant Shift to Safe-Haven Metal" as Governments Throw "All the Money in the World" at Failing Economy
"There has been a significant shift into physical gold due to its safe-haven qualities," noted David Holmes, head of precious metals dealing at Dresdner Kleinwort in London, to the Financial Times overnight.
"Until very recently, that [physical] demand interest was being offset by paper investors who were liquidating speculative long positions as part of the wider pattern of deleveraging."
The total number of Open Contracts in Gold Derivatives shrank last week by 6% from a month earlier.
"The situation is very similar to the 1930s, but it is going to unfold differently," says George Soros, the billionaire hedge-fund manager, in an interview with Germany's Speigel magazine.
"We have learned not to allow the financial market to collapse. We will spend all the money in the world to prevent that from happening."
All the money in the world grew to a yet-bigger number on Tuesday, as the Bank of Korea put five trillion Won ($3.3 billion) into a new government lending scheme aimed at unfreezing Seoul's money market.
The South Korean government has already announced a "stabilization" package of 10 trillion Won.
The central bank of Malaysia today cut its key interest rate by 0.25% to 3.25% – the first cut since spring 2006 – and reduced the ratio of cash deposits which commercial banks must keep in its reserves, stoking the supply of credit.
The International Monetary Fund (IMF) meantime approved a $7.6 billion loan package for Pakistan in a bid to avert a debt default before the end of 2010.
Over in Washington, US Treasury secretary Henry Paulson was due to announce a new tax-funded lending institution – run directly by the Federal Reserve – offering auto loans, student loans and credit cards to consumers.
"We are going to do what what's required to jolt this economy back into shape," promised US president-elect Barack Obama at a news conference yesterday.
"We have to make sure that the stimulus is significant enough...of [the] size and scope necessary...that it really gives a jolt to the economy."
http://news.goldseek.com/BullionVault/1227623923.php
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