Comments on: Fed Considering More Extreme Measures, Further Expansion of Its Role

By: The Band-Aid Has Landed! | Jameson

The Band-Aid Has Landed! | Jameson — Tue, 01 Sep 2009 16:35:33 +0000

[...] Fed Considering More Extreme Measures, Further Expansion of Its Role – Naked Capitalism – Yves Smith – 06 October 08 [...]

By: Contrarian Profits

Contrarian Profits — Mon, 06 Oct 2008 16:20:00 +0000

This is why it is important to consider moving your assets offshore now…

http://www.contrarianprofits.com/articles/why-you-need-to-move-assets-offshore-now/5762

By: Anonymous

Anonymous — Mon, 06 Oct 2008 14:27:00 +0000

I’m not holding my breath that Paulson will do the right thing. If he is anything like the quants at his old company that I had the extreme displeasure of having to work with, he probably believes in his own infallibility and will not listen to anyone tell him he might be wrong.

By: Matt Dubuque

Matt Dubuque — Mon, 06 Oct 2008 13:24:00 +0000

Yves, your methodological approach seems inconsistent to me here.

You regularly quote Bookstaber arguing against excessive meddling in tightly coupled systems.

And yet you seem to criticize the Fed for not IMMEDIATELY plunging into the morass of CP intervention, which is far more complex than the blogosphere anticipates.

That seems contradictory to me. I'm not trying to be counterproductive here; I am just personally unable to reconcile these two prominent strands in your thought.

For me, the next logical step for the Fed is a reprise of Operation Twist, forcing overnight rates HIGHER and three month rates LOWER by selling the shortest maturity debt and BUYING three to six month Treasury paper.

Matt Dubuque
mdubuque@yahoo.com

By: Anonymous

Anonymous — Mon, 06 Oct 2008 12:40:00 +0000

The very same group that had a large roll in causing this mess in a power grab. How nice.

By: Hubert

Hubert — Mon, 06 Oct 2008 11:56:00 +0000

I wondering if Paulson might not do the right thing after all. Maybe as Yves found out, the new plan was just the old SIV-plan and maybe both were a kind of great bluff as they apparently did and do not make real sense.
We are all following the HP plutocrat from Goldman script. Maybe, just maybe and hopefully, we are wrong.
INdications? First, the plan allows everything.
Dizard in the FT: "They can do this through an elastic clause in the law that can be stretched wide enough to accommodate an M1 tank: Section 3 (9) (B), in case you’re curious. Under that section, part of the “definitions” section, the secretary of the Treasury can purchase “any other financial instrument that the secretary, after consultation with the chairman of the board of governors of the Federal Reserve system, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.”
So HP could do the right thing if (if!) he wants.
Second, maybe this plan as outlined is a bluff to keep bank stocks alive in the meantime as shareholders hope for the bailout and restrain from panic selling.
THird, if Goldman knew they could sell their "trash to Treasury" maybe they would not pay through their nose to Buffett. Maybe they have reason for both, maybe not.
Fourth, Buffetts praise for HP initiative. I sound naive, but I think Buffett would not lie and run the risk of believing his own BS in the end as all the others. (Or I just do not want to lose my belief in the integrity of WB).
Fifth, HP is a very rich man. Does he want to run the risk to be demonized as the man who ruined the country and bail out Wall Street? Too many guns in your country. He would then have to live outside the US for personal security reasons.
Sixt, time. The mortgage buyout plan might not work before November. Many CDS settle in October (LEH, WaMu). HP might come up with some bank recap in October.
Conclusio: HP is either very smart and honest or very deluded and corrupt.

By: Anonymous

Anonymous — Mon, 06 Oct 2008 11:24:00 +0000

Does the Fed really still exist or is it just a ghost.

By: Richard Kline

Richard Kline — Mon, 06 Oct 2008 10:54:00 +0000

I am much in favor of the US public authorities backing munis, or even lending directly to local governments, and of them lending in large volume into working capital markets. Not that I want “Ham-fisted Hank” Paulson anywhere near such operations. If, however, the Treasury or Fed in some tandem lent a sizeable portion of that Mega Fund for that purpose, I’d look far more favorably on this initiative. Don’t bail out, lend out _instead_. The key point is that the real economy needs to be saved from the incontinence of the banking system. And the hands of the public authorities in closing down dead banks would be no little strengthened if said authorities can be confident that lending into the real economy is stable enough to withstand the shock of bank failures.

The question is, By what medium? this is, of course, why we need a public banking sector in the US, but since we don’t have one how do we proceed? If the Fed merely calls up its Favored Few big banks, and has _them_ do such lending, at a fat private profit, that reeks. But how, then? Such a process is ripe for graft and favoritism if done in a panic, but we’ve squandered fifteen months and don’t really have fifteen _days_ to get up to speed on this now.

But Hank Paulson, want to be a hero rather than the heel you’ve been auditioning for when the do the movie? Junk the TARP rot you used to sell all this to Congress, leave the dead banks to drop, and use your authority to divert, say, $400B to direct lending into the real and public economy.

By: Douglas

Douglas — Mon, 06 Oct 2008 09:45:00 +0000

Demember GOLD, worth a look… Fed may overextend on monetization… even though “they lack the expertise”, expect the evil geniuses to proceed anyway (it’s an emergency, remember!) while consulting no one.. I heard even the Govenator wants to get in on some of that skril. the ladles are gonna come out immediately.

By: Jojo

Jojo — Mon, 06 Oct 2008 09:30:00 +0000

Banking “holiday” soon? Martial law?