Bankruptcy

More Bad News; More Fed Pumping Money into Economy

By J. Michael McBride

Let's see, this morning, we have a 63,000 job loss reported, instead of an expected gain; we see an all time high in foreclosures and then hear that the Fed is increasing its cheap loans to banks (for collateral which is of what quality?).

"The Federal Reserve announced Friday that it will boost the size of auctions planned for March 10 and March 24 to $50 billion each. That is up from the $30 billion limits it had previously announced. The auctions serve as short-term loans to get banks the cash they need to keep lending to their customers.

The Fed, in a statement, said it planned to continue the auctions for at least six months, and would move to even larger auction amounts if needed.

In a second step, the Fed said it will make $100 billion available to a broad range of financial players through a series of separate transactions starting on Friday.
...
The Fed has been working to pump billions of dollars into the banking system to aid an economy rocked by the subprime mortgage crisis and the severe tightening of credit. The central bank started its new type of auction in December to provide short-term loans to cash-strapped banks in hopes of keeping them lending. So far, the Fed has made available a total of $160 billion in short-term loans to banks through six auctions."

Here is a link to this article:
http://biz.yahoo.com/ap/080307/fed_credit_crisis.html?.v=2

I do not know what methods that the Fed will employ to get the additional 100 billion into the economy. I assume that Chairman Bernanke will not use the method he wrote about in articles before he became chair, dropping money from helicopters.

The impact of all this money dumping has had on the dollar is predictable. Here is a link to an article headlined: Dollar Drops to New Low Against Euro, which about says it all.
http://biz.yahoo.com/ap/080307/dollar.html?.v=4

Michael

Full post as published by Texas Lawyer Blog on March 07, 2008 (boomark / email).