Posted on 03/18/2009 5:21:24 PM PDT by Steelfish
Federal Reserve plan stuns investors
By Krishna Guha in Washington March 18 2009
The Federal Reserve on Wednesday stunned investors by announcing plans to buy $300bn of US government debt, triggering a plunge in bond yields and the dollar.
In a further display of aggression, the US central bank also said it was more than doubling its purchases of securities issued by housing giants Fannie Mae and Freddie Mac to $1,450bn. It said it now expected to keep interest rates near zero for an “extended period” of time.
The yield on 10-year US Treasuries plummeted 50 basis points to 2.50 per cent, while private borrowing rates fell by roughly half as much. Equities bounced with big gains in troubled banks such as Citigroup and Bank of America. But the dollar fell 3.2 per cent against the euro and 2.3 per cent against the yen.
Goldman Sachs said the Fed was throwing the “kitchen sink” at the problem. The plan to buy Treasuries caught investors off guard. “It appears that they wanted to give the market a jolt,” said Peter Hooper, an economist at Deutsche Bank.
The last time the central bank attempted to bring down yields on long-term securities through direct intervention came during the ill-fated Operation Twist in the 1960s. Recent comments by Ben Bernanke, Federal Reserve chairman, and William Dudley, New York Fed president, did not suggest that Treasury purchases were imminent.
But the deterioration in the US outlook, problems rolling out the US financial rescue plan and the Bank of England’s success in buying UK government gilts seem to have persuaded the Fed to act.
(Excerpt) Read more at ft.com ...
This too will backfire. The Fed has shot their wad, so to speak. There are no more bullets left in the gun.
I get the feeling that they don’t even think they are playing with real money.
I fear a Wiemar Republic here soon.
Okay, this is what his RIGHT hand is doing. Every time they announce some stunning economic stupidity, their LEFT hand is taking away some unrelated freedom.
WATCH the left hand!
Fannie and Freddie are financial disasters kept only on life support by our reckless irresponsible liberal government leaders.
Please tell me what corrections have been put in place to fix the original problems?
Is the tooth fairy or Santa Claus suppose to show up and make everything right?
DAMN!
But it’s for free trade.
China appeals to Washington to safeguard assets
http://www.freerepublic.com/focus/f-news/2205693/posts
Voodoo economics as practiced by financial cannibals.
What are they "buying" the $300bn with? Wink wink!
I get the feeling that they don’t even think they are playing with real money.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Uh, are they?
unfortunately, there’s no limit whatsoever to the amount of treasury instrunents that the fed can purchase. the u.s. doesn’t “need” china to buy our paper, as the fed needs no asset base of its own to write any size “check” to the treasury. it’s the biggest money making franchise in the world. i told friends, during zero’s campaign, that if elected he would have home prices back up to their previous highs before the end of 4 years. as hard to believe as it may be, it may work for him. government schools and free stuff are real facilitators.
inflation began today. it’s just a postdated check.
Sigh.
This is going to sink us a lot faster.
Really bad move...Obama,Geithner & crew don’t have a clue.
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