Fed Unanimously Adopts Bank Liquidity Proposal

Fox News ^ | October 24, 2013 | Reuters

[Son House]

The banks would hold a buffer of liquid assets - such as government bonds - to draw on to ensure they can meet withdrawals by depositors, to post collateral due to credit rating downgrades and to meet other needs.

U.S. government debt and excess reserves held at the Fed are deemed the most liquid under the Fed's proposal, while claims on government-sponsored enterprises, such as mortgage finance giants Fannie Mae and Freddie Mac, are less liquid and may make up only 40 percent of the buffer.

[Son House]

Bonds were once considered a safe investment. In my opinion, as several Municipalities have filed for bankruptcy and the outstanding debt of our Government makes safe investing less likely to be in bonds. Someone who may have more time to analyze this may want to weigh in here.

[Rusty0604]

“The banks would hold a buffer of liquid assets - such as government bonds - to draw on to ensure they can meet withdrawals by depositors, to post collateral due to credit rating downgrades and to meet other needs.”

Sounds like they need more gov’t bondholders.

[DannyTN]

It was a mistake to lower the bank reserve requirements in the first place and to exempt so many different types of funds from it.

That’s why Congress had to bail out the banks is that there was no room left in the system to respond to the liquidity crisis. They had already lowered the reserve requirement down to 1% prior to the crisis.

And I believe that was done to lower our standards to international standards. We should have insisted that any bank doing business in the U.S. come up to our standards not lower ourselves to theirs.

[Darteaus94025]

"Sounds like they need more gov’t bondholders"

Exactly right! This is the government taking your money: you deposit cash, and they-through the bank-give you a "promise". Yes, I know that currency is also a "promise", but try to spend a government bond and you will see my point.

All broke countries turn to confiscating money from their citizens bank deposits, retirement accounts, etc. Google recent history of the Cyprus bank "bailout" and Poland's confiscation of 50% of retirement savings.

[Son House]

Could it be a replacement for the quantitative easing;

This could be the largest Fed stimulus yet
http://www.freerepublic.com/focus/f-news/3084498/posts

Given this environment and the leadership transition as Ben Bernanke’s term ends in January, the Fed will likely continue its current stimulus program at full blast — buying $85 billion in bonds each month — until at least March 2014.

That means QE3 could total around $1.6 trillion, calculates Paul Ashworth of Capital Economics. That’s more than either of its two predecessors. In contrast, QE1 totaled $1.5 trillion and the second round of stimulus added up to about $600 billion.

[Rusty0604]

Probably one of the first things the Democrats would do if they won the House in 2014 is go after our retirements. They were holding meetings about that very thing and licking their chops before they lost the House.

It would be for our own good, of course, since we are too dumb to save or invest for ourselves; just as we are too dumb to buy our own health insurance policy.

[lafarge]

Buy the dip